Y2Part 1Clean−It−Up, Inc., is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine-hours. In2020, budgeted fixed manufacturing overhead cost was$18,000,000. Budgeted variable manufacturing overhead was $8 per machine-hour. The denominator level was 1,000,000 machine-hours. Requirements1. Prepare a graph for fixed manufacturing overhead. The graph should display how Clean -It-Up,Inc.'s fixed manufacturing overhead costs will be depicted for the purposes of (a) planning andcontrol and (b) inventory costing.2. Suppose that 850,000 machine-hours were allowed for actual output produced in 2020, but925,000 actual machine-hours were used. Actual manufacturing overhead was $7,862,500,variable, and $18,100,000, fixed. Compute (a) the variable manufacturing overhead spending andefficiency variances and (b) the fixed manufacturing overhead spending and production-volumevariances.3. What is the amount of the under- or overallocated variable manufacturing overhead and theunder- or overallocated fixed manufacturing overhead? Why are the flexible-budget variance andthe under- or overallocated overhead amount always the same for variable manufacturingoverhead but rarely the same for fixed manufacturing overhead?4. Suppose the denominator level was 750,000 rather than 1,000,000 machine-hours. Whatvariances in requirement 2 would be affected? Recompute them.

Variance analysis is a tool to compute the deviations between budgeted figures and actual data so…

Answered: Requirements 1. Prepare a graph for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Y2 Part 1 Clean−It−Up, Inc., is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine-hours. In 2020, budgeted fixed manufacturing overhead cost was$18,000,000. Budgeted variable manufacturing overhead was $8 per machine-hour. The denominator level was 1,000,000 machine-hours.

Requirements
1. Prepare a graph for fixed manufacturing overhead. The graph should display how Clean -It-Up,
Inc.'s fixed manufacturing overhead costs will be depicted for the purposes of (a) planning and
control and (b) inventory costing.
2. Suppose that 850,000 machine-hours were allowed for actual output produced in 2020, but
925,000 actual machine-hours were used. Actual manufacturing overhead was $7,862,500,
variable, and $18,100,000, fixed. Compute (a) the variable manufacturing overhead spending and
efficiency variances and (b) the fixed manufacturing overhead spending and production-volume
variances.
3. What is the amount of the under- or overallocated variable manufacturing overhead and the
under- or overallocated fixed manufacturing overhead? Why are the flexible-budget variance and
the under- or overallocated overhead amount always the same for variable manufacturing
overhead but rarely the same for fixed manufacturing overhead?
4. Suppose the denominator level was 750,000 rather than 1,000,000 machine-hours. What
variances in requirement 2 would be affected? Recompute them.

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