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.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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