Quality Fender uses a standard cost system and provide the following​ information: 1​(Click the icon to view the​ information.) Quality Fender allocates manufacturing overhead to production based on standard direct labor hours. Quality Fender reported the following actual results for 2024​: actual number of fenders​ produced, 20,000​; actual variable​ overhead, $4,610​; actual fixed​ overhead, $24,000​; actual direct labor​ hours, 360.     Read the requirements2.   Requirement 1. Compute the overhead variances for the​ year: variable overhead cost​ variance, variable overhead efficiency​ variance, fixed overhead cost​ variance, and fixed overhead volume variance.   Begin with the variable overhead cost and efficiency variances. Select the required​ formulas, compute the variable overhead cost and efficiency​ variances, and identify whether each variance is favorable​ (F) or unfavorable​ (U).​(You may need to simply the formula based on the data provided. Abbreviations​ used: AC​ = actual​ cost; AQ​ = actual​ quantity; FOH​ = fixed​ overhead; SC​ = standard​ cost; SQ​ = standard​ quantity; VOH​ = variable​ overhead.)       Formula   Variance VOH cost variance = (1) (AC - SC) × AQ =   (2) U VOH efficiency variance = (3)   =   (4) F Now compute the fixed overhead cost and volume variances. Select the required​ formulas, compute the fixed overhead cost and volume​ variances, and identify whether each variance is favorable​ (F) or unfavorable​ (U).​(Abbreviations used: AC​ = actual​ cost; AQ​ = actual​ quantity; FOH​ = fixed​ overhead; SC​ = standard​ cost; SQ​ = standard​ quantity.)       Formula   Variance FOH cost variance = (5)   =   (6)   FOH volume variance = (7)   =   (8)   Requirement 2. Explain why the variances are favorable or unfavorable.   The variable overhead cost variance is (9)      because management spent (10)      than budgeted for the actual production. The variable overhead efficiency variance is (11)      because management used (12)      direct labor hours than standard and variable overhead is applied​ (incurred) based on direct labor. The fixed overhead cost variance is (13)      because management spent (14)      than the amount budgeted for fixed overhead. The fixed overhead volume variance is (15)      because management allocated (16)      fixed overhead to jobs than was budgeted. 1: Data Table Static budget variable overhead $4,608 Static budget fixed overhead $23,040 Static budget direct labor hours 576 hours Static budget number of units 24,000 units Standard direct labor hours 0.024 hours per fender 2: Requirements 1. Compute the overhead variances for the​ year: variable overhead cost​ variance, variable overhead efficiency​ variance, fixed overhead cost​ variance, and fixed overhead volume variance. 2. Explain why the variances are favorable or unfavorable. (1)        (AC - SC) × AQ   (AC - SC) × SQ   (AQ - SQ) × AC   (AQ - SQ) × SC   Actual FOH - Allocated FOH   Actual FOH - Budgeted FOH   Bugeted FOH - Allocated FOH (2)        F   U (3)        (AC - SC) × AQ   (AC - SC) × SQ   (AQ - SQ) × AC   (AQ - SQ) × SC   Actual FOH - Allocated FOH   Actual FOH - Budgeted FOH   Bugeted FOH - Allocated FOH (4)        F   U (5)        (AC - SC) × AQ   (AC - SC) × SQ   (AQ - SQ) × AC   (AQ - SQ) × SC   Actual FOH - Allocated FOH   Actual FOH - Budgeted FOH   Bugeted FOH - Allocated FOH (6)        F   U (7)        (AC - SC) × AQ   (AC - SC) × SQ   (AQ - SQ) × AC   (AQ - SQ) × SC   Actual FOH - Allocated FOH   Actual FOH - Budgeted FOH   Bugeted FOH - Allocated FOH (8)        F   U (9)     unfavorable    favorable (10)     more    less (11)     favorable    unfavorable (12)     fewer    more (13)     unfavorable    favorable (14)     more    less (15)     unfavorable    favorable (16)     less    more

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Quality Fender uses a standard cost system and provide the following​ information:
1​(Click
the icon to view the​ information.)
Quality
Fender allocates manufacturing overhead to production based on standard direct labor hours.
Quality
Fender reported the following actual results for
2024​:
actual number of fenders​ produced,
20,000​;
actual variable​ overhead,
$4,610​;
actual fixed​ overhead,
$24,000​;
actual direct labor​ hours,
360.
 
 
Read the
requirements2.
 
Requirement 1. Compute the overhead variances for the​ year: variable overhead cost​ variance, variable overhead efficiency​ variance, fixed overhead cost​ variance, and fixed overhead volume variance.
 
Begin with the variable overhead cost and efficiency variances. Select the required​ formulas, compute the variable overhead cost and efficiency​ variances, and identify whether each variance is favorable​ (F) or unfavorable​ (U).​(You may need to simply the formula based on the data provided. Abbreviations​ used: AC​ = actual​ cost; AQ​ = actual​ quantity; FOH​ = fixed​ overhead; SC​ = standard​ cost; SQ​ = standard​ quantity; VOH​ = variable​ overhead.)
 
 
 
Formula
 
Variance
VOH cost variance
=
(1) (AC - SC) × AQ
=
 
(2) U
VOH efficiency variance
=
(3)  
=
 
(4) F
Now compute the fixed overhead cost and volume variances. Select the required​ formulas, compute the fixed overhead cost and volume​ variances, and identify whether each variance is favorable​ (F) or unfavorable​ (U).​(Abbreviations used: AC​ = actual​ cost; AQ​ = actual​ quantity; FOH​ = fixed​ overhead; SC​ = standard​ cost; SQ​ = standard​ quantity.)
 
 
 
Formula
 
Variance
FOH cost variance
=
(5)  
=
 
(6)  
FOH volume variance
=
(7)  
=
 
(8)  
Requirement 2. Explain why the variances are favorable or unfavorable.
 
The variable overhead cost variance is
(9) 
 
 
because management spent
(10) 
 
 
than budgeted for the actual production.
The variable overhead efficiency variance is
(11) 
 
 
because management used
(12) 
 
 
direct labor hours than standard and variable overhead is applied​ (incurred) based on direct labor.
The fixed overhead cost variance is
(13) 
 
 
because management spent
(14) 
 
 
than the amount budgeted for fixed overhead.
The fixed overhead volume variance is
(15) 
 
 
because management allocated
(16) 
 
 
fixed overhead to jobs than was budgeted.
1: Data Table
Static budget variable overhead
$4,608
Static budget fixed overhead
$23,040
Static budget direct labor hours
576 hours
Static budget number of units
24,000 units
Standard direct labor hours
0.024 hours per fender
2: Requirements
1.
Compute the overhead variances for the​ year: variable overhead cost​ variance, variable overhead efficiency​ variance, fixed overhead cost​ variance, and fixed overhead volume variance.
2.
Explain why the variances are favorable or unfavorable.
(1) 
 
 
 
(AC - SC) × AQ
 
(AC - SC) × SQ
 
(AQ - SQ) × AC
 
(AQ - SQ) × SC
 
Actual FOH - Allocated FOH
 
Actual FOH - Budgeted FOH
 
Bugeted FOH - Allocated FOH
(2) 
 
 
 
F
 
U
(3) 
 
 
 
(AC - SC) × AQ
 
(AC - SC) × SQ
 
(AQ - SQ) × AC
 
(AQ - SQ) × SC
 
Actual FOH - Allocated FOH
 
Actual FOH - Budgeted FOH
 
Bugeted FOH - Allocated FOH
(4) 
 
 
 
F
 
U
(5) 
 
 
 
(AC - SC) × AQ
 
(AC - SC) × SQ
 
(AQ - SQ) × AC
 
(AQ - SQ) × SC
 
Actual FOH - Allocated FOH
 
Actual FOH - Budgeted FOH
 
Bugeted FOH - Allocated FOH
(6) 
 
 
 
F
 
U
(7) 
 
 
 
(AC - SC) × AQ
 
(AC - SC) × SQ
 
(AQ - SQ) × AC
 
(AQ - SQ) × SC
 
Actual FOH - Allocated FOH
 
Actual FOH - Budgeted FOH
 
Bugeted FOH - Allocated FOH
(8) 
 
 
 
F
 
U
(9) 
 
 unfavorable
 
 favorable
(10) 
 
 more
 
 less
(11) 
 
 favorable
 
 unfavorable
(12) 
 
 fewer
 
 more
(13) 
 
 unfavorable
 
 favorable
(14) 
 
 more
 
 less
(15) 
 
 unfavorable
 
 favorable
(16) 
 
 less
 
 more
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