Question

Blaze Corp, applies overhead on the basis of direct labor hours. For the month of March, the company planned production of 10,000 units (80% of its production capacity of 12,500 units) and prepared the following budget: Operating Levels 808 10,000 30,000 Overhead Budget Production in units Standard direct labor hours Budgeted overhead Variable overhead costo Indirect materials Indirect labor Power Maintenance Total variable costs Fixed overhead costs Rent of factory building Depreciation-Machinery Taxes and insurance Supervisory salaries Total fixed costs Total overhead costs $ 16,200 16,600 10,000 8,200 51,000 15,000 25,000 2,600 23,400 66,000 $ 117,000 During March, the company operated at 90% capacity (11,250 units), and it incurred the following actual overhead costs. Overhead Costs Indirect materials Indirect labor Power Maintenance Rent of factory building Depreciation Machinery $ 16,200 16,600 11,250 10,000 15,000 24,150

Answer 1

Solution 1:

Controllable variance
Particulars		Amount
Total actual overhead		$121,600.00
Flexible budget overhead:
Variable overhead	$57,375.00
Fixed overhead	$66,000.00
Total		$123,375.00
Overhead controllable variance		$1,775 F

solution 2:

Volume Variance
Fixed overhead applied ($66,000/10000*11250)	$74,250.00
Budgeted fixed overhead	$66,000.00
Volume variance	$8,250 F

Solution 3:

Blaze Corp.
Overhead variance report
For the Month Ended March 31
Expected Production volume	80% of capacity
Production level achieved	90% of capacity
Volume variance	$8,250 Favorable
Particulars	Flexible Budget	Actual	Variance	Fav/Unfav.
Variable overhead costs:
Indirect materials	$18,225.00	$16,200.00	$2,025.00	Favorable
Indirect labor	$18,675.00	$16,600.00	$2,075.00	Favorable
Power	$11,250.00	$11,250.00	$0.00	No Variance
Maintenance	$9,225.00	$10,000.00	$775.00	Unfavorable
Total variable overhead cost	$57,375.00	$54,050.00	$3,325.00	Favorable
Fixed overhead costs:
Depreciation machinery	$25,000.00	$24,150.00	$850.00	Favorable
Rent of factory building	$15,000.00	$15,000.00	$0.00	No Variance
Supervisory salaries	$23,400.00	$25,200.00	$1,800.00	Unfavorable
Taxes and insurance	$2,600.00	$3,200.00	$600.00	Unfavorable
Total fixed overhead cost	$66,000.00	$67,550.00	$1,550.00	Unfavorable
Total costs	$123,375.00	$121,600.00	$1,775.00	Favorable