Question

The (partial) cost sheet for the single product manufactured at Vienna Company follows. Direct labor Variable overhead Fixed overhead (6 hours @ $20) (6 hours @ $2) (6 hours @ $4) $120 12 24 The master budget level of production is 60,000 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 $110,000 253,000 140,000 U 4,000 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 variance 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 price variance = (AQ*AP)-(AQ*SP)

-4000 = 110000-(AQ*2)

-4000=110000-2AQ

2AQ = 114000

AQ = 57000

Direct labor efficiency variance = (SP*AQ)-(SP*SQ)

140000=(20*57000)-(20*SQ)

140000=1140000-(20*SQ)

20SQ = 1000000

SQ = 50000

Part A

Variable overhead efficiency variance = SP*(AQ-SQ) = 2*(57000-50000) = $14000 U

Part B

Fixed overhead price variance = Actual fixed overhead – budgeted fixed overhead = 253000-(60000*4) = $13000 U

Part C

Fixed overhead production volume variance = budgeted fixed overhead – applied overhead = 240000-(50000*4) = $40000 U