OH variances The manager of the Texas Department of Transportation has determined that it typically takes 30 minutes for the department’s employees to register a new car. In Bexar County, the predetermined fixed overhead rate was computed on an estimated 10,000 direct labor hours per month and is $9 per direct labor hour, whereas the predetermined variable overhead rate is $3 per direct labor hour. During July, 18,800 cars were registered in Bexar County, and 9,500 direct labor hours were worked in registering those vehicles. For the month, variable overhead was $27,700 and fixed overhead was $90,800. Note: In answering the following questions, do not use negative signs with your answers. a. Compute overhead variances using a four-variance approach. VOH Spending Variance Actual VOH - Budgeted VOH = VOH Spending Variance - = VOH Efficiency Variance Budgeted VOH - Applied VOH = VOH Efficiency Variance - = FOH Spending Variance Actual FOH - Budgeted FOH = FOH Spending Variance - = FOH Volume Variance Budgeted FOH - Applied FOH = FOH Volume Variance - = b. Compute overhead variances using a three-variance approach. OH Spending Variance Actual OH - Budget at Actual = OH Spending Variance - = OH Efficiency Variance Budget at Actual - Budget at Standard = OH Efficiency Variance - = Volume Variance Budget at Standard - Applied OH = Volume Variance - = c. Compute overhead variances using a two-variance approach. Budget Variance Actual OH - Budgeted OH = Budget Variance - = Volume Variance Budgeted OH - Applied OH = Volume Variance - =

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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OH variances
The manager of the Texas Department of Transportation has determined that it typically takes 30 minutes for the department’s employees to register a new car. In Bexar County, the predetermined fixed overhead rate was computed on an estimated 10,000 direct labor hours per month and is $9 per direct labor hour, whereas the predetermined variable overhead rate is $3 per direct labor hour.
During July, 18,800 cars were registered in Bexar County, and 9,500 direct labor hours were worked in registering those vehicles. For the month, variable overhead was $27,700 and fixed overhead was $90,800.
Note: In answering the following questions, do not use negative signs with your answers.

a. Compute overhead variances using a four-variance approach.

VOH Spending Variance
Actual VOH	-	Budgeted VOH	=	VOH Spending Variance
	-		=

VOH Efficiency Variance
Budgeted VOH	-	Applied VOH	=	VOH Efficiency Variance
	-		=

FOH Spending Variance
Actual FOH	-	Budgeted FOH	=	FOH Spending Variance
	-		=

FOH Volume Variance
Budgeted FOH	-	Applied FOH	=	FOH Volume Variance
	-		=

b. Compute overhead variances using a three-variance approach.

OH Spending Variance
Actual OH	-	Budget at Actual	=	OH Spending Variance
	-		=

OH Efficiency Variance
Budget at Actual	-	Budget at Standard	=	OH Efficiency Variance
	-		=

Volume Variance
Budget at Standard	-	Applied OH	=	Volume Variance
	-		=

c. Compute overhead variances using a two-variance approach.

Budget Variance
Actual OH	-	Budgeted OH	=	Budget Variance
	-		=

Volume Variance
Budgeted OH	-	Applied OH	=	Volume Variance
	-		=

OH variances
The manager of the Texas Department of Transportation has determined that it typically takes 30 minutes for the department's employees to register a new car. In Bexar County, the predetermined fixed overhead rate
was computed on an estimated 10,000 direct labor hours per month and is $9 per direct labor hour, whereas the predetermined variable overhead rate is $3 per direct labor hour.
During July, 18,800 cars were registered in Bexar County, and 9,500 direct labor hours were worked in registering those vehicles. For the month, variable overhead was $27,700 and fixed overhead was $90,800.
Note: In answering the following questions, do not use negative signs with your answers.
a. Compute overhead variances using a four-variance approach.
Actual VOH
$ 27,700
VOH Spending Variance
Budgeted VOH
$
= VOH Spending Variance
0x = $
VOH Efficiency Variance
0 X F
Budgeted VOH
-
Applied VOH
$
0 ×
$
= VOH Efficiency Variance
0x = $
0 × U
FOH Spending Variance
Actual FOH
Budgeted FOH
$
90,800
$
90,000
= FOH Spending Variance
800
U
FOH Volume Variance
Budgeted FOH
Applied FOH
$
90,000
$
= FOH Volume Variance
0 × = $
0 XU
b. Compute overhead variances using a three-variance approach.
Actual OH
$
OH Spending Variance
Budget at Actual = OH Spending Variance
0 ×
$
Budget at Actual
$
0x = $
OH Efficiency Variance
Neither For U
Budget at Standard = OH Efficiency Variance
0 ×
$
0 × = $
Volume Variance
0×U
Budget at Standard
$
-
Applied OH
= Volume Variance
0 ×
$
0 × = $
0 U
c. Compute overhead variances using a two-variance approach.

DM variances; journal entries
Skip Company produces a product called Lem. The standard direct material cost to produce one unit of Lem is four quarts of raw material at $2.50 per quart. During May, 4,200 quarts of raw material were purchased
at a cost of $10,080. All the purchased material was used to produce 1,000 units of Lem.
a. Compute the material price variance and material quantity variance for May.
Note: Do not use a negative sign with your answers.
$
Material price variance
Material quantity variance $
420
Favorable
0 × Unfavorable
b. Assume the same facts except that Skip Company purchased 6,000 quarts of material at the previously calculated cost per quart, but used only 4,200 quarts. Compute the material price variance and material
quantity variance for May, assuming that Skip identifies variances at the earliest possible time.
Note: Do not use a negative sign with your answers.
$
0 Favorable
500 Unfavorable
Material price variance
Material quantity variance $
c. Prepare the journal entries to record the material price and usage variances calculated in (b).
Note: List any multiple debits or any multiple credits in alphabetical order by account name.
Account
Debit
Credit
Raw Material Inventory
÷
0 ×
0
Accounts Payable
Material Price Variance
0 ×
0 ✓
×
To record material price variance
Material Quantity Variance
Work in Process Inventory
Raw Material Inventory
÷
500
0 ✓
10000
0
0 ✓
10500
To record material quantity variance

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.

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