Question

Norwall Company's budgeted variable manufacturing overhead cost is $1.90 per machine-hour and its budgeted fixed manufacturing overhead is $87,000 per month. The following information is available for a recent month a. The denominator activity of 34,800 machine-hours is used to compute the predetermined overhead rate b. At a denominator activity of 34,800 machine-hours, the company should produce 12,000 units of product. c. The company's actual operating results were Number of units produced Actual machine-hours Actual variable manufacturing overhead cost Actual fixed manufacturing overhead cost 12,930 36,030 $ 72,060 $ 85,300 Required 1. Compute the predetermined overhead rate and break it down into variable and fixed cost elements. (Round your answers to 2 decimal places.) 2. Compute the standard hours allowed for the actual production 3. Compute the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Round your intermediate calculations and final answers to 2 decimal places.) per MH per MH per MH MHs 1. Predetermined overhead rate Variable element Fixed element 2. Standard hours allowed for the actual production 3. Variable overhead rate variance Variable overhead efficiency variance Fixed overhead budget variance Fixed overhead volume variance

Answer 1

				WN		Working Note:
1	Predetermined Overhead Rate:	4.40	Per MH			BudgetedFixed OH	87000
	Variable Element	1.90	Per MH			Budgeted MH	34800
	Fixed Element	2.50	Per MH	1	1	Fixed Predetermined OH	2.50
2	Standard Hours Allowed for the Production	37497	MHs	2
3	Variable Overhead Rate Variance	-3603	Unfavourable	3A	2	Budgeted MH	34800
	Variable Overhead Efficency Variance	2787.3	Favourable	3B		Budgeted Units	12000
	Fixed Overhead Budget Variance	1700	Favourable	4A
	Fixed Overhead Volume Variance	6742.5	Favourable			Standard MH PU	2.90
						Actual Units	12930
4A	Fixed Overhead Budget Variance
	Budgeted FOH-Actual FOH					Standard Hours Allowed for the Production	37497
	87000-85300					(Standard MH PU*Actual Units)
	1700	F
					3	Standard:	Qty	PU	Amount
4B	Fixed Overhead Volume Variance					Variable OH	2.90	1.90	5.51
	Budgeted FOH-FOH Applied
	87000-93742.5					Standard For Actual Production	Qty	PU	Amount
	-6742.5	F				Variable OH	37,497	1.90	71244.30
	FOH Applied:					Actual For Actual Production	Qty	PU	Amount
	Standard Hour Allowed	37497				Variable OH	36,030	2.00	72060
	Fixed OH Rate	2.50						(72060/36030)
	Applied FOH	93742.5			3A	Variable Overhead Rate Variance
						(Standard Price-Actual Price)Actual Hours
						(1.90-2.00)36030
						-3603	UF
					3B	Variable Overhead Effiency Variance
						(Standard Hour-Actual Hour)Standard Price
						(37497-36030)1.90
						2787.3	F