Puyallup Corporation developed the following budgeted and actual overhead costs for the current year: BUDGETED (at 20,000 direct labor hours) ACTUAL (at 18,000 direct labor hours) Variable Overhead ₱3,800,000 ₱3,510,000 Fixed Overhead 5,000,000 4,536,000 TOTAL ₱8,800,000 ₱8,046,000 Consistent with the prior year, overhead costs are is applied based on direct labor hours. Puyallup budgeted 20,000 direct labor hours for the current year which is the plant’s normal operating capacity. Required: Calculate the following variances: Variable overhead spending variance Fixed overhead spending variance Idle capacity variance
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Puyallup Corporation developed the following budgeted and actual
|
BUDGETED (at 20,000 direct labor hours) |
ACTUAL (at 18,000 direct labor hours) |
|
|
Variable Overhead |
₱3,800,000 |
₱3,510,000 |
|
Fixed Overhead |
5,000,000 |
4,536,000 |
|
TOTAL |
₱8,800,000 |
₱8,046,000 |
Consistent with the prior year, overhead costs are is applied based on direct labor hours. Puyallup budgeted 20,000 direct labor hours for the current year which is the plant’s normal operating capacity.
Required: Calculate the following variances:
- Variable overhead spending variance
- Fixed overhead spending variance
- Idle capacity variance
- Overall factory overhead variance
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