Requirements Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance. Explain why the variances are favorable or unfavorable. 1. 2. Requirement 1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance. Begin by selecting the formulas needed to compute the variable overhead (VOH) and fixed overhead (FOH) variances, and then compute each variance amount. = VOH cost variance = VOH efficiency variance =FOH cost variance = FOH volume variance Data table Static budget variable overhead Static budget fixed overhead Static budget direct labor hours Static budget number of units $ 7,000 $ 3,000 1,000 hours 4,000 units - X Watson allocates manufacturing overhead to production based on standard direct labor hours. Last month, Watson reported the following actual results: actual variable overhead, $10,100; actual fixed overhead, $2,800; actual production of 7,100 units at 0.30 direct labor hours per unit. The standard direct labor time is 0.25 direct labor hours per unit (1,000 static direct labor hours / 4,000 static units).
Requirements Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance. Explain why the variances are favorable or unfavorable. 1. 2. Requirement 1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance. Begin by selecting the formulas needed to compute the variable overhead (VOH) and fixed overhead (FOH) variances, and then compute each variance amount. = VOH cost variance = VOH efficiency variance =FOH cost variance = FOH volume variance Data table Static budget variable overhead Static budget fixed overhead Static budget direct labor hours Static budget number of units $ 7,000 $ 3,000 1,000 hours 4,000 units - X Watson allocates manufacturing overhead to production based on standard direct labor hours. Last month, Watson reported the following actual results: actual variable overhead, $10,100; actual fixed overhead, $2,800; actual production of 7,100 units at 0.30 direct labor hours per unit. The standard direct labor time is 0.25 direct labor hours per unit (1,000 static direct labor hours / 4,000 static units).
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:The following information relates to Watson, Inc.'s overhead costs for the month:
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Requirements
1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
Explain why the variances are favorable or unfavorable.
2.
Requirement 1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
Begin by selecting the formulas needed to compute the variable overhead (VOH) and fixed overhead (FOH) variances, and then compute each variance amount.
=
=
=
VOH cost variance
VOH efficiency variance
FOH cost variance
FOH volume variance
Data table
Static budget variable overhead
Static budget fixed overhead
Static budget direct labor hours
Static budget number of units
$
7,000
$ 3,000
1,000 hours
4,000 units
Watson allocates manufacturing overhead to production based on
standard direct labor hours. Last month, Watson reported the
following actual results: actual variable overhead, $10,100; actual
fixed overhead, $2,800; actual production of 7,100 units at 0.30
direct labor hours per unit. The standard direct labor time is 0.25
direct labor hours per unit (1,000 static direct labor hours / 4,000
static units).
X
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