Question

In the most recent month, 120,000 items were shipped to customers using 4,100 direct labor-hours. The company incurred a total of $11,480 in variable overhead costs. According to the company's standards, 0.03 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $2.85 per direct labor-hour. Required: 1. What is the standard labor-hours allowed (SH) to ship 120,000 items to customers? 2, what is the standard variable overhead cost allowed (SH × SR) to ship 120,000 items to customers? 3. What is the variable overhead spending variance? 4. What is the variable overhead rate variance and the variable overhead efficiency variance? (For requirements 3 and 4, 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. Do no round intermediate calculations.) 1. Standard quantity of labor-hours allowed 2. Standard variable overhead cost allowed 3. |Variable overhead spending variance 4. Variable overhead rate variance Variable overhead efficiency variance

Answer 1

Standard labor hours allowed = 120,000*0.03 = 3600
Standard voh cost allowed = 3600*2.85 = 10,260
Voh spending variance = 10,260 - 11,480 = 1220 U
Voh rate variance = (SR-AR) * AH = (2.85 - 11480/4100) * 4100 = 205 F Voh efficiency variance = (SH-AH) * SR = (3600 - 4100) * 2.85 = 1425 U