Required: 1. Compute the applied fixed overhead. 2. Compute the fixed overhead spending and volume variances. Enter amounts as positive numbers and select Favorable or Unfavorable. Spending variance Volume variance
Required: 1. Compute the applied fixed overhead. 2. Compute the fixed overhead spending and volume variances. Enter amounts as positive numbers and select Favorable or Unfavorable. Spending variance Volume variance
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 Application, Fixed and Variable Overhead Variances
Zepol Company is planning to produce 600,000 power drills for the coming year. The company uses direct labor
hours to assign overhead to products. Each drill requires 0.75 standard hour of labor for completion. The total
budgeted overhead was $1,777,500. The total fixed overhead budgeted for the coming year is $832,500.
Predetermined overhead rates are calculated using expected production, measured in direct labor hours. Actual
results for the year are:
Actual production (units)
Actual direct labor hours (AH) 446,000
Required:
1. Compute the applied fixed overhead.
594,000 Actual variable overhead $928,000
Actual fixed overhead $835,600
2. Compute the fixed overhead spending and volume variances. Enter amounts as positive numbers and select
Favorable or Unfavorable.
Spending variance $
Volume variance
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