Problem 10A-9 (Algo) Applying Overhead; Overhead Variances [LO10-3, LO10-4] Baird Company makes Polish sausage. It applied manufacturing overhead to production based on standard direct labor-hours. According to the company's planning budget, the following manufacturing overhead costs should be incurred at an activity level c 30,000 labor-hours (the denominator activity level): Variable manufacturing overhead cost Fixed manufacturing overhead cost Total manufacturing overhead cost During the most recent year, the following operating results were recorded: Activity: Actual labor-hours worked Standard labor-hours allowed for the actual output $ 172,500 232,500 $ 405,000 Cost: Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred At the end of the year, the company's Manufacturing Overhead account contained the following data: Actual Debit Manufacturing Overhead 409,800 Applied 31,800 Management would like to determine the cause of the $31,800 underapplied overhead. Required: 1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements. 2. Show how the $378,000 Applied figure in the Manufacturing Overhead account was computed. 3. Break down the $31,800 underapplied overhead into four components: (1) variable overhead rate variance, (2) variable overhead efficiency variance, (3) fixed overhead budget variance, and (4) fixed overhead volume variance. Credit 27,000 28,000 378,000 $ 199,800 $ 210,000
Problem 10A-9 (Algo) Applying Overhead; Overhead Variances [LO10-3, LO10-4] Baird Company makes Polish sausage. It applied manufacturing overhead to production based on standard direct labor-hours. According to the company's planning budget, the following manufacturing overhead costs should be incurred at an activity level c 30,000 labor-hours (the denominator activity level): Variable manufacturing overhead cost Fixed manufacturing overhead cost Total manufacturing overhead cost During the most recent year, the following operating results were recorded: Activity: Actual labor-hours worked Standard labor-hours allowed for the actual output $ 172,500 232,500 $ 405,000 Cost: Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred At the end of the year, the company's Manufacturing Overhead account contained the following data: Actual Debit Manufacturing Overhead 409,800 Applied 31,800 Management would like to determine the cause of the $31,800 underapplied overhead. Required: 1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements. 2. Show how the $378,000 Applied figure in the Manufacturing Overhead account was computed. 3. Break down the $31,800 underapplied overhead into four components: (1) variable overhead rate variance, (2) variable overhead efficiency variance, (3) fixed overhead budget variance, and (4) fixed overhead volume variance. Credit 27,000 28,000 378,000 $ 199,800 $ 210,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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![Problem 10A-9 (Algo) Applying Overhead; Overhead Variances [LO10-3, LO10-4]
Baird Company makes Polish sausage. It applied manufacturing overhead to production based on standard direct labor-hours.
According to the company's planning budget, the following manufacturing overhead costs should be incurred at an activity level of
30,000 labor-hours (the denominator activity level):
Variable manufacturing overhead cost
Fixed manufacturing overhead cost
Total manufacturing overhead cost
During the most recent year, the following operating results were recorded:
Activity:
Actual labor-hours worked
Standard labor-hours allowed for the actual output
Actual
Cost:
Actual variable manufacturing overhead cost incurred
Actual fixed manufacturing overhead cost incurred
At the end of the year, the company's Manufacturing Overhead account contained the following data:
Manufacturing Overhead
409,800 Applied
31,800
Debit
$ 172,500
232,500
$ 405,000
Credit
27,000
28,000
378,000
$ 199,800
$ 210,000
Management would like to determine the cause of the $31,800 underapplied overhead.
Required:
1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements.
2. Show how the $378,000 Applied figure in the Manufacturing Overhead account was computed.
3. Break down the $31,800 underapplied overhead into four components: (1) variable overhead rate variance, (2) variable overhead
efficiency variance, (3) fixed overhead budget variance, and (4) fixed overhead volume variance.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb36b02c8-75e7-4ebe-94bb-bb470e00476e%2F05e5a8fd-8ea2-4b93-8bb3-79448aab0010%2Fqbvxujsb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 10A-9 (Algo) Applying Overhead; Overhead Variances [LO10-3, LO10-4]
Baird Company makes Polish sausage. It applied manufacturing overhead to production based on standard direct labor-hours.
According to the company's planning budget, the following manufacturing overhead costs should be incurred at an activity level of
30,000 labor-hours (the denominator activity level):
Variable manufacturing overhead cost
Fixed manufacturing overhead cost
Total manufacturing overhead cost
During the most recent year, the following operating results were recorded:
Activity:
Actual labor-hours worked
Standard labor-hours allowed for the actual output
Actual
Cost:
Actual variable manufacturing overhead cost incurred
Actual fixed manufacturing overhead cost incurred
At the end of the year, the company's Manufacturing Overhead account contained the following data:
Manufacturing Overhead
409,800 Applied
31,800
Debit
$ 172,500
232,500
$ 405,000
Credit
27,000
28,000
378,000
$ 199,800
$ 210,000
Management would like to determine the cause of the $31,800 underapplied overhead.
Required:
1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements.
2. Show how the $378,000 Applied figure in the Manufacturing Overhead account was computed.
3. Break down the $31,800 underapplied overhead into four components: (1) variable overhead rate variance, (2) variable overhead
efficiency variance, (3) fixed overhead budget variance, and (4) fixed overhead volume variance.
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