It was the end of the first quarter, and Kimberly was evaluating the company's manufacturing overhead cost situation. She recalled the heated discussions during the budget meetings at the end of the prior year as managers thoroughly considered their options. The resulting annual budgeted variable-MOH cost of $46,500 and budgeted fixed-MOH cost of $55,800 support a planned volume of 6,200 units. Standards were also set at that time for the cost driver, machine hours, where each unit should use 1.25 machine hours. At the end of this first quarter, the company had used 2,064 machine hours in its production of 1,600 units. Actual variable-MOH costs incurred thus far were $11,662, and total fixed-MOH costs thus far totaled $13,210.
It was the end of the first quarter, and Kimberly was evaluating the company's manufacturing overhead cost situation. She recalled the heated discussions during the budget meetings at the end of the prior year as managers thoroughly considered their options. The resulting annual budgeted variable-MOH cost of $46,500 and budgeted fixed-MOH cost of $55,800 support a planned volume of 6,200 units. Standards were also set at that time for the cost driver, machine hours, where each unit should use 1.25 machine hours. At the end of this first quarter, the company had used 2,064 machine hours in its production of 1,600 units. Actual variable-MOH costs incurred thus far were $11,662, and total fixed-MOH costs thus far totaled $13,210.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
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A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Determine the fixed-MOH price and volume variances for this first quarter.
Fixed-MOH price variance
Fixed-MOH volume variance
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Transcribed Image Text:It was the end of the first quarter, and Kimberly was evaluating the company's manufacturing overhead cost situation. She recalled the
heated discussions during the budget meetings at the end of the prior year as managers thoroughly considered their options. The
resulting annual budgeted variable-MOH cost of $46,500 and budgeted fixed-MOH cost of $55,800 support a planned volume of
6,200 units. Standards were also set at that time for the cost driver, machine hours, where each unit should use 1.25 machine hours.
At the end of this first quarter, the company had used 2,064 machine hours in its production of 1,600 units. Actual variable-MOH costs
incurred thus far were $11,662, and total fixed-MOH costs thus far totaled $13,210.
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