Question

The (partial) cost sheet for the single product manufactured at Vienna Company follows. Direct labor Variable overhead Fixed overhead (9 hours (9 hours (9 hours 525) $2) $4) $225 18 The master budget level of production is 66,000 direct-labor hours, which is also the production volume used to compute the fixed overhead application rate. Other information available for operations over the past accounting period include the following. Actual variable overhead incurred Actual fixed overhead incurred Direct labor efficiency variance Variable overhead price variance $116, ese 277,620 146, se u 14.DE F Required: a. What was the variable overhead efficiency variance? b. What was the fixed overhead price variance? c. What was the fixed overhead production volume variance? (For all requirements, Indicate the effect of each varlance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) a Variable overhead efficiency variance b. Fixed overhead price variance c. Fixed overhead production volume variance

Answer 1

Variable overhead efficiency variance Fixed overhead price variance Fixed overhead production volume variance $11.680 U $24.600 U $23,360 U Compute variable overhead efficiency variance as follows: Variable overhead =(Standard variable overhead ratex Standard hours for actual output) efficiency variance) - (Standard variable overhead ratex Actual hours) =(S2x59,160)-(65,000 $2) = $118,320-$130.000 = $11,680 Unfavorable Therefore, variable overhead efficiency variance is $11,680 Unfavorable Working note: Compute actual hours worked as follows: Variable overhead =(Standard variable overheadratex Actual hours) price variance - (Actual variable overhead rate x Actual hours) $14.000 =($2x Actual hours) - $116.000 Actual hours - S116,000+S14,000 $2 = 65,000 Hours

Compute standard hours for actual hours worked as follows: Direct labor efficiency variance = (Standard hours x Standard rate) -Actual hours Standard rate) -$146.000 = (Standard hours $25) -(65.000 $25) $1,625,000 - $146,000 Standard hours = $25 = 59,160 Compute fixed overhead price variance as follows: Fixed overhead price variance =(Standard fixed overhead rate Budgeted hours) -Actual fixed overhead incurred = (S4 x 66.000)-$277.600 = $24.600 Unfavorable Therefore, fixed overhead price variance is $24,600 Unfavorable Compute the fixed overhead production volume variance as follows: Fixed overhead production volume variance = (Standard hours - Actual hours) x Standard rate =(59,160 - 65.000) $4 = $23,360 Unfavorable Therefore, fixed overhead production volume variance is $23,360 Unfavorable