Brief Exercise 11-7 Computing Fixed Overhead Variances (LO2- CC11, 12) Primara Corporation has a standard costing system in which it applies overhead to products on the basis of the standard direct labour- hours allowed for the actual output of the period. Data concerning the most recent year appear below: Total budgeted fixed overhead cost for the year Actual fixed overhead cost for the year Budgeted standard direct labour-hours (denominator level of activity) Actual direct labour-hours Standard direct labour-hours allowed for the actual output Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. Predetermined overhead rate per DLH Fixed overhead budget variance Fixed overhead volume variance $ 500,000 $ 508,000 50,000 54,000 52,000 2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Brief Exercise 11-7 Computing Fixed Overhead Variances (LO2- CC11, 12) Primara Corporation has a standard costing system in which it applies overhead to products on the basis of the standard direct labour- hours allowed for the actual output of the period. Data concerning the most recent year appear below: Total budgeted fixed overhead cost for the year Actual fixed overhead cost for the year Budgeted standard direct labour-hours (denominator level of activity) Actual direct labour-hours Standard direct labour-hours allowed for the actual output Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. Predetermined overhead rate per DLH Fixed overhead budget variance Fixed overhead volume variance $ 500,000 $ 508,000 50,000 54,000 52,000 2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Chapter1: Financial Statements And Business Decisions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Brief Exercise 11-7 Computing Fixed Overhead Variances (LO2- CC11, 12)
Primara Corporation has a standard costing system in which it applies overhead to products on the basis of the standard direct labour-
hours allowed for the actual output of the period. Data concerning the most recent year appear below:
Total budgeted fixed overhead cost for the year
Actual fixed overhead cost for the year
Budgeted standard direct labour-hours (denominator level of activity)
Actual direct labour-hours
Standard direct labour-hours allowed for the actual output
Required:
1. Compute the fixed portion of the predetermined overhead rate for the year.
Predetermined overhead rate
per DLH
Fixed overhead budget variance
Fixed overhead volume variance
$ 500,000
$ 508,000
50,000
54,000
52,000
2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for
favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
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