Sanjana Company makes watches. For 2017, the company expected fixed overhead costs of $648,000. Sanjana uses direct labor-hours to allocate fixed overhead and anticipates 21,600 hours during the year for an expected output of 540,000 units. An equal number of units are budgeted for each month. During October, 48,000 watches were produced and $52,000 was spent on fixed overhead. Calculate the following: a. the fixed overhead rate for 2017; b. the fixed overhead spending variance for October; and c. the production-volume variance for October.
Sanjana Company makes watches. For 2017, the company expected fixed overhead costs of $648,000. Sanjana uses direct labor-hours to allocate fixed overhead and anticipates 21,600 hours during the year for an expected output of 540,000 units. An equal number of units are budgeted for each month. During October, 48,000 watches were produced and $52,000 was spent on fixed overhead. Calculate the following: a. the fixed overhead rate for 2017; b. the fixed overhead spending variance for October; and c. the production-volume variance for October.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
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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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Question
Sanjana
Company makes watches. For
2017,
the company expected fixed $648,000.
Sanjana
uses direct labor-hours to allocate fixed overhead and anticipates
21,600
hours during the year for an expected output of
540,000
units. An equal number of units are budgeted for each month. During
October,
48,000
watches were produced and
$52,000
was spent on fixed overhead.Calculate the following:
a. the fixed overhead rate for
2017;
b. the fixed overhead spending variance for
October;
andc. the production-volume variance for
October.
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