Exercise 10-58 Overhead Variances At the beginning of the year, Lopez Company had the following standard cost sheet for one of its chemical products: Direct materials (4 lbs. @ $2.80) Direct labor (2 hrs. @ $18.00) FOH (2 hrs. @ $5.20) VOH (2 hrs. @ $0.70) Standard cost per unit $11.20 36.00 10.40 1.40 $59.00 Lopez computes its overhead rates using practical volume, which is 90,000 units. The actual results for the year are as follows: (a) Units produced:88,000; (b) Direct labor: 170,000 hours at $18.10; (c) FOH: $930,000; and (d) VOH: $125,000.
Exercise 10-58 Overhead Variances At the beginning of the year, Lopez Company had the following standard cost sheet for one of its chemical products: Direct materials (4 lbs. @ $2.80) Direct labor (2 hrs. @ $18.00) FOH (2 hrs. @ $5.20) VOH (2 hrs. @ $0.70) Standard cost per unit $11.20 36.00 10.40 1.40 $59.00 Lopez computes its overhead rates using practical volume, which is 90,000 units. The actual results for the year are as follows: (a) Units produced:88,000; (b) Direct labor: 170,000 hours at $18.10; (c) FOH: $930,000; and (d) VOH: $125,000.
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:Exercise 10-58 Overhead Variances
At the beginning of the year, Lopez Company had the following standard cost sheet for one of
its chemical products:
Direct materials (4 lbs. @ $2.80)
Direct labor (2 hrs. @ $18.00)
FOH (2 hrs. @ $5.20)
VOH (2 hrs. @ $0.70)
Standard cost per unit
$11.20
36.00
10.40
1.40
$59.00
Lopez computes its overhead rates using practical volume, which is 90,000 units. The actual
results for the year are as follows: (a) Units produced:88,000; (b) Direct labor: 170,000 hours
at $18.10; (c) FOH: $930,000; and (d) VOH: $125,000.
1. Compute the variable overhead
spending and efficiency variances.
2. Compute the fixed overhead spending
and volume variances
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