Sedona Company set the following standard costs for one unit of its product for this year. Direct material (20 pounds @ $3.20 per pound) Direct labor (10 hours @ $8.30 per DLH) $ 64.00 83.00 Variable overhead (10 hours @ $4.70 per DLH) Fixed overhead (10 hours @ $2.30 per DLH) 47.00 23.00 Standard cost per unit $ 217.00 The $7.00 ($4.70 + $2.30) total overhead rate per direct labor hour (DLH) is based on a predicted activity level of 34,200 units, which is 60% of the factory's capacity of 57,000 units per month. The following monthly flexible budget information is available. Flexible Budget Budgeted production (units) Budgeted direct labor (standard hours) Budgeted overhead Variable overhead Fixed overhead Total overhead Actual variable overhead Actual fixed overhead Actual total overhead Operating Levels (% of capacity) 55% 60% 65% $ 1,411,000 858,050 $ 2,269,050 31,350 313,500 34,200 342,000 $ 1,473,450 $ 1,607,400 786,600 37,050 370,500 $ 1,741,350 786,600 During the current month, the company operated at 55% of capacity, direct labor of 295,000 hours were used, and the following actual overhead costs were incurred. 786,600 $ 2,260,050 $ 2,394,000 $ 2,527,950 Compute the total variable overhead variance and identify it as favorable or unfavorable. (Indicate the effect of the variance by electing favorable, unfavorable, or no variance.)
Sedona Company set the following standard costs for one unit of its product for this year. Direct material (20 pounds @ $3.20 per pound) Direct labor (10 hours @ $8.30 per DLH) $ 64.00 83.00 Variable overhead (10 hours @ $4.70 per DLH) Fixed overhead (10 hours @ $2.30 per DLH) 47.00 23.00 Standard cost per unit $ 217.00 The $7.00 ($4.70 + $2.30) total overhead rate per direct labor hour (DLH) is based on a predicted activity level of 34,200 units, which is 60% of the factory's capacity of 57,000 units per month. The following monthly flexible budget information is available. Flexible Budget Budgeted production (units) Budgeted direct labor (standard hours) Budgeted overhead Variable overhead Fixed overhead Total overhead Actual variable overhead Actual fixed overhead Actual total overhead Operating Levels (% of capacity) 55% 60% 65% $ 1,411,000 858,050 $ 2,269,050 31,350 313,500 34,200 342,000 $ 1,473,450 $ 1,607,400 786,600 37,050 370,500 $ 1,741,350 786,600 During the current month, the company operated at 55% of capacity, direct labor of 295,000 hours were used, and the following actual overhead costs were incurred. 786,600 $ 2,260,050 $ 2,394,000 $ 2,527,950 Compute the total variable overhead variance and identify it as favorable or unfavorable. (Indicate the effect of the variance by electing favorable, unfavorable, or no variance.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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:Sedona Company set the following standard costs for one unit of its product for this year.
Direct material (20 pounds @ $3.20 per pound)
Direct labor (10 hours @ $8.30 per DLH)
$ 64.00
83.00
Variable overhead (10 hours @ $4.70 per DLH)
Fixed overhead (10 hours @ $2.30 per DLH)
47.00
23.00
Standard cost per unit
$ 217.00
The $7.00 ($4.70 + $2.30) total overhead rate per direct labor hour (DLH) is based on a predicted activity level of 34,200
units, which is 60% of the factory's capacity of 57,000 units per month. The following monthly flexible budget information
is available.
Flexible Budget
Budgeted production (units)
Budgeted direct labor (standard hours)
Budgeted overhead
Variable overhead
Fixed overhead
Total overhead
Actual variable overhead
Actual fixed overhead
Actual total overhead
Operating Levels (% of capacity)
55%
60%
65%
$ 1,411,000
858,050
$ 2,269,050
31,350
313,500
34,200
342,000
37,050
370,500
$ 1,473,450 $ 1,607,400 $
786,600
786,600
$ 2,260,050 $ 2,394,000 $ 2,527,950
,741,350
786,600
During the current month, the company operated at 55% of capacity, direct labor of 295,000 hours were used, and the
following actual overhead costs were incurred.
. Compute the total variable overhead variance and identify it as favorable or unfavorable. (Indicate the effect of the variance by
electing favorable, unfavorable, or no variance.)
2. Compute the total fixed overhead variance and identify it as favorable or unfavorable. (Indicate the effect of the variance by
electing favorable, unfavorable, or no variance.)
Transcribed Image Text:Standard Direct Labor Hours Overhead Rate
Variable overhead variance $
Fixed overhead variance
4.70
2.30
Standard
Direct Labor
Hours
-At 55% of Operating Capacity........
Standard
Overhead
Applied
Actual
Overhead
858,050
Overhead
Variance
Favorable/Unfavorable
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