Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output c 127,000 units requiring 508,000 direct labor hours. (Practical capacity is 528,000 hours.) Annual budgeted overhead costs total $848,360, of which $604,520 is fixed overhead. A total of 119,200 units using 506,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $261,400, and ac fixed overhead costs were $555,550. Required:
Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output c 127,000 units requiring 508,000 direct labor hours. (Practical capacity is 528,000 hours.) Annual budgeted overhead costs total $848,360, of which $604,520 is fixed overhead. A total of 119,200 units using 506,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $261,400, and ac fixed overhead costs were $555,550. Required:
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead
Section: Chapter Questions
Problem 21E: Georgia Gasket Co. budgets 8,000 direct labor hours for the year. The total overhead budget is...
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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:Overhead Variances, Four-Variance Analysis
Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of
127,000 units requiring 508,000 direct labor hours. (Practical capacity is 528,000 hours.) Annual budgeted overhead costs total $848,360, of which $604,520 is fixed
overhead. A total of 119,200 units using 506,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $261,400, and actual
fixed overhead costs were $555,550.
Required:
1. Compute the fixed overhead spending and volume variances.
Fixed Overhead Spending Variance
Fixed Overhead Volume Variance
2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations
Variable Overhead Spending
Variable Overhead Efficiency Variance
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