Lynwood Company produces surge protectors. To help control costs, Lynwood employs a standard costing system and uses a flexible budget to predict overhead costs at various levels of activity. For the most recent year, Lynwood used a standard overhead rate of $18 per direct labor hour. The rate was computed using practical activity. Budgeted overhead costs are $396,000 for 18,000 direct labor hours and $540,000 for 30,000 direct labor hours. During the past year, Lynwood generated the following data: (a) Actual production: 100,000 units; (b) Fixed overhead volume variance: $20,000 U; (c) Variable overhead efficiency variance: $18,000 F; (d) Actual fixed overhead costs: $200,000; and (e) Actual variable overhead costs: $310,000. Required: 1. Calculate the fixed overhead rate. $ 2. Determine the fixed overhead spending variance. Enter amount as a positive number and select Favorable or Unfavorable. $ Unfavorable 3. Determine the variable overhead spending variance. Round hours in the interim calculations to a whole hour. Enter amount as a positive number and select Favorable or Unfavorable. $ Unfavorable 4. Determine the standard hours allowed per unit of product. Assume actual units equal planned units. Round to five decimal places. hours per unit
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.
Lynwood Company produces surge protectors. To help control costs, Lynwood employs a
Required:
1. Calculate the fixed overhead rate.
$
2. Determine the fixed overhead spending variance. Enter amount as a positive number and select Favorable or Unfavorable.
$ Unfavorable
3. Determine the variable overhead spending variance. Round hours in the interim calculations to a whole hour. Enter amount as a positive number and select Favorable or Unfavorable.
$ Unfavorable
4. Determine the standard hours allowed per unit of product. Assume actual units equal planned units. Round to five decimal places.
hours per unit
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