E 8-17 Calculating factory overhead: two variances Munoz Manufacturing Co. normally produces 10,000 units of product X each month. Each unit requires 2 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are $2.50 and $1.50 per direct labor hour, respectively. Cost and production data for May follow: Production for the month. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9,000 unitsDirect labor hours used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18,500 hoursFactory overhead incurred for:Variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$28,500Fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52,000a. Calculate the flexible-budget variance.b. Calculate the production-volume variance.c. Was the total factory overhead under- or overapplied? By what amount?Use this format: VanDerbeck, Chapter 08 297E8-16a. and b.Actual factory overheadBudget based on standard hoursStandard hours x stancdard rate9,000 units × 2 hr × $4/unit =Fixed costs ….... $52,000Fixed cost:10,000 x $5.00Variable cost:9,000 x $3.00 =$50,000Variable costs ....28,50O$ 80,50027.000$77,0 00$72,00oFlexible-Budget Variance| (a) $3,500 (U)Production-Volume Variance(b) $5,0 00 (U)Net Factory Overhead Variance$8,500 (U)Actual factory overhead (total).............Applied factory overhead (18,0o 0 hours x $4)Underapplied factory overhead .Net variance:Flexible-budget variance (U)Production-volume variance (U)$80,50O8,500Net variance (U)....$48,500E8-17a. and b.Standard hours × standard rateActual factory overheadBudget based on standard hoursFixed c ost:10,000 x $10.00Variable cost:11,000 x $5.00 =Fixed costs ...... $10o3,00011,000 units x $15 /unit =$100,0 00Variable costs ....48,000O55,000$155,0 00$151,000$165,000Flexible-Budget Varianoce(a)$4,0 00(F)Production-Volume Variance(b) $10 .000 (F>Net Factory Overhead Variance$14,00O (F)Actual factory overhead (total)Applied factory overheadOverrapplied factory overhead.c.$151,000$14,00002013 Cengage Learning. All Rights Reserved. May not be seanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The question is based on the concept of Cost Accounting.

Answered: Munoz Manufacturing Co. normally…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

E 8-17 Calculating factory overhead: two variances Munoz Manufacturing Co. normally produces 10,000 units of product X each month. Each unit requires 2 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are $2.50 and $1.50 per direct labor hour, respectively. Cost and production data for May follow: Production for the month. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9,000 units

Direct labor hours used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18,500 hours

Factory overhead incurred for:

Variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$28,500

Fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52,000

a. Calculate the flexible-budget variance.

b. Calculate the production-volume variance.

c. Was the total factory overhead under- or overapplied? By what amount?

Use this format:

VanDerbeck, Chapter 08 297
E8-16
a. and b.
Actual factory overhead
Budget based on standard hours
Standard hours x stancdard rate
9,000 units × 2 hr × $4/unit =
Fixed costs ….... $52,000
Fixed cost:
10,000 x $5.00
Variable cost:
9,000 x $3.00 =
$50,000
Variable costs ....
28,50O
$ 80,500
27.000
$77,0 00
$72,00o
Flexible-Budget Variance
| (a) $3,500 (U)
Production-Volume Variance
(b) $5,0 00 (U)
Net Factory Overhead Variance
$8,500 (U)
Actual factory overhead (total).............
Applied factory overhead (18,0o 0 hours x $4)
Underapplied factory overhead .
Net variance:
Flexible-budget variance (U)
Production-volume variance (U)
$80,50O
8,500
Net variance (U)....
$4
8,500
E8-17
a. and b.
Standard hours × standard rate
Actual factory overhead
Budget based on standard hours
Fixed c ost:
10,000 x $10.00
Variable cost:
11,000 x $5.00 =
Fixed costs ...... $10o3,000
11,000 units x $15 /unit =
$100,0 00
Variable costs ....
48,000O
55,000
$155,0 00
$151,000
$165,000
Flexible-Budget Varianoce
(a)$4,0 00(F)
Production-Volume Variance
(b) $10 .000 (F>
Net Factory Overhead Variance
$14,00O (F)
Actual factory overhead (total)
Applied factory overhead
Overrapplied factory overhead.
c.
$151,000
$14,000
02013 Cengage Learning. All Rights Reserved. May not be seanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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.

Expert Solution