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labor (7 hours @ $14 per hour) e overhead (7 hours@ $6 per hour) verhead (7 hours @ $12 per hour). d cost per unit 98.00 42.00 84.00 $ 389.00

labor (7 hours @ $14 per hour) e overhead (7 hours@ $6 per hour) verhead (7 hours @ $12 per hour). d cost per unit 98.00 42.00 84.00 $ 389.00

FINANCIAL ACCOUNTING
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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8.C

What is the controllable variance?

 

Trini Company set the following standard costs per unit for its single product Direct materials (30 pounds @ $5.50 per pound) Direct labor (7 hours @ $14 per hour) Variable overhead (7 hours @ $6 per hour) Fixed overhead (7 hours@ $12 per hour) Standard cost per unit Overhead is applied using direct labor hours. The standard overhead rate is based on a predicted activity level of 80% of the company's capacity of 62,000 units per quarter. The following additional information is available. Operating Levels Production (in units) Standard direct labor hours (7 DLH/unit) Budgeted overhead (flexible budget) Fixed overhead Variable overhead $ 165.00 98.00 42.00 84.00 $ 389.00 70% 43,400 303,800 $ 4, 166,400 $ 1,822, 800 Direct materials (1,674, 000 pounds @ $5.50 per pound) Direct labor (390, 600 hours @ $14 per hour) Overhead (390, 600 hours @ $18 per hour) Standard (budgeted) cost Actual costs incurred during the current quarter follow. Direct materials (1,658, 000 pounds @ $7.60 per pound) Direct labor (386, 600 hours $12.00 per hour) Fixed overhead Variable overhead Actual cost 80% 49,600 347, 200 Required: (a) Compute the variable overhead spending and efficiency variances. (b) Compute the fixed overhead spending and volume variances. (c) Compute the overhead controllable variance. $ 4, 166,400 $ 2,083, 200 During the current quarter, the company operated at 90% of capacity and produced 55,800 units; actual direct labor totaled 386,600 hours. Units produced were assigned the following standard costs. $ 9,207,000 5,468, 400 7,030, 800 $ 21, 706, 200 90% 55,800 390, 600 $ 12, 600, 800 4,639, 200 3,321, 400 3,109, 400 $ 23,670, 800 $ 4,166,400 $ 2,343, 600
Transcribed Image Text:Trini Company set the following standard costs per unit for its single product Direct materials (30 pounds @ $5.50 per pound) Direct labor (7 hours @ $14 per hour) Variable overhead (7 hours @ $6 per hour) Fixed overhead (7 hours@ $12 per hour) Standard cost per unit Overhead is applied using direct labor hours. The standard overhead rate is based on a predicted activity level of 80% of the company's capacity of 62,000 units per quarter. The following additional information is available. Operating Levels Production (in units) Standard direct labor hours (7 DLH/unit) Budgeted overhead (flexible budget) Fixed overhead Variable overhead $ 165.00 98.00 42.00 84.00 $ 389.00 70% 43,400 303,800 $ 4, 166,400 $ 1,822, 800 Direct materials (1,674, 000 pounds @ $5.50 per pound) Direct labor (390, 600 hours @ $14 per hour) Overhead (390, 600 hours @ $18 per hour) Standard (budgeted) cost Actual costs incurred during the current quarter follow. Direct materials (1,658, 000 pounds @ $7.60 per pound) Direct labor (386, 600 hours $12.00 per hour) Fixed overhead Variable overhead Actual cost 80% 49,600 347, 200 Required: (a) Compute the variable overhead spending and efficiency variances. (b) Compute the fixed overhead spending and volume variances. (c) Compute the overhead controllable variance. $ 4, 166,400 $ 2,083, 200 During the current quarter, the company operated at 90% of capacity and produced 55,800 units; actual direct labor totaled 386,600 hours. Units produced were assigned the following standard costs. $ 9,207,000 5,468, 400 7,030, 800 $ 21, 706, 200 90% 55,800 390, 600 $ 12, 600, 800 4,639, 200 3,321, 400 3,109, 400 $ 23,670, 800 $ 4,166,400 $ 2,343, 600
Required A Required B Required C Compute the overhead controllable variance. (Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.) Overhead Controllable Variance Variable overhead spending variance Variable overhead efficiency variance Fixed overhead spending variance Controllable variance $ 789,800 24,000 845,000 Unfavorable Favorable Favorable Favorable
Transcribed Image Text:Required A Required B Required C Compute the overhead controllable variance. (Indicate the effect of each variance by selecting favorable, unfavorable, or no variance.) Overhead Controllable Variance Variable overhead spending variance Variable overhead efficiency variance Fixed overhead spending variance Controllable variance $ 789,800 24,000 845,000 Unfavorable Favorable Favorable Favorable
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Step 1

Controllable variance is the difference of the actual overheads cost and budgeted overhead cost for actual production.

A variance consist of two parts , rate and volume. Controllable variance refers to the rate.

 

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