Calgary Paper Company produces paper for photocopiers. The company has developed standard overhead rates based on a monthly capacity of 62,000 direct-labor hours as follows: Standard costs per unit (one box of paper): Variable overhead (2 direct-labor hours @ $4.5 per hour)$9 Fixed overhead (2 direct-labor hours @ $10 per hour) 20 Total$29 During April, 31,000 units were scheduled for production; however, only 26,000 units were actually produced. The following data relate to April. Actual direct-labor cost incurred was $848,000 for 53,000 actual hours of work.Actual overhead incurred totaled $843,800, of which $243,800 was variable and $600,000 was fixed.Required:Prepare two exhibits similar to Exhibit 11-6 and Exhibit 11-8 in the chapter, which show the following variances. State whether each variance is favorable or unfavorable, where appropriate.1. Variable-overhead spending variance.2. Variable-overhead efficiency variance.3. Fixed-overhead budget variance.4. Fixed-overhead volume variance.

Fixed cost are the cost which do not change when sales or production volume increase or decrease. Variable cost are the cost which change when sales or production volume increase or decrease.Answer Variable O/H Spending And Efficiency variance- Actual variable o/h Projected variable o/h Flexible budgeted :Variable o/h variable o/h applied to wip Actual qty x Actual price Actual qty x Standard price Standard qty allowed x Standard price Standard qty x Standard price 53000. $4.6. (243800/53000) 53000. $4.5 52000. $4.5 (26000*2) 52000. $4.5 (26000*2) $243800 $238500 $234000 $234000 Variable o/h spending variance. 5300 (243800-238500) Unfavourable variable o/h efficiency variance. 4500 (238500-234000) unfavourabe. No Difference (234000-234000) Fixed O/H Budget And volume variance- Fixed o/h applied to wi Actual Fixed O/H x Budgeted fixed O/H Standard qty x Standard price $600000. $620000 ($62000*10) 36000. 10 $360000 Fixed o/h budgeted variance = ( 600000-620000)=$20000 favorable Fixed o/h volume variance =(360000-620000) =$260000 Unfavorable.

Answered: Calgary Paper Company produces paper…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Calgary Paper Company produces paper for photocopiers. The company has developed standard overhead rates based on a monthly capacity of 62,000 direct-labor hours as follows:


Standard costs per unit (one box of paper):
Variable overhead (2 direct-labor hours @ $4.5 per hour)	$	9
Fixed overhead (2 direct-labor hours @ $10 per hour)		20
Total	$	29

During April, 31,000 units were scheduled for production; however, only 26,000 units were actually produced. The following data relate to April.

Actual direct-labor cost incurred was $848,000 for 53,000 actual hours of work.
Actual overhead incurred totaled $843,800, of which $243,800 was variable and $600,000 was fixed.

Required:
Prepare two exhibits similar to Exhibit 11-6 and Exhibit 11-8 in the chapter, which show the following variances. State whether each variance is favorable or unfavorable, where appropriate.
1. Variable-overhead spending variance.
2. Variable-overhead efficiency variance.
3. Fixed-overhead budget variance.
4. Fixed-overhead volume variance.

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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