Sedona Company set the following standard costs for one unit of its product for this year. Direct material (20 pounds @ $3.30 per pound) Direct labor (15 hours @ 16.00 per DLH) Variable overhead (15 hours @ $2.80 per DLH) Fixed overhead (15 hours @ $1.20 per DLH) Standard cost per unit The $4.00 ($2.80+ $1.20) total overhead rate per direct labor hour (DLH) is based on a predicted activity level of 43,500 units, which is 75% of the factory's capacity of 58,000 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 $1,624,000 866,000 $ 2,490,000 $ 66.00 90.00 42.00 18.00 $216.00 Operating Levels (% of capacity) 70% 75% 40,600 609,000 $1,705,200 783,000 $ 2,408,200 43,500 652,500 $ 1,827,000 783,000 $ 2,610,000 BOX 46,400 606,000 During the current month, the company operated at 70% of capacity, direct labor of 575,000 hours were used, and the following actual overhead costs were incurred. $ 1,948,800 783,000 $ 2,731,800 1. Compute the total variable overhead variance and identify it as favorable or unfavorable (Indicate the effect of the variance by selecting 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 selecting 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 @ $3.30 per pound) Direct labor (15 hours @ 16.00 per DLH) Variable overhead (15 hours @ $2.80 per DLH) Fixed overhead (15 hours @ $1.20 per DLH) Standard cost per unit The $4.00 ($2.80+ $1.20) total overhead rate per direct labor hour (DLH) is based on a predicted activity level of 43,500 units, which is 75% of the factory's capacity of 58,000 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 $1,624,000 866,000 $ 2,490,000 $ 66.00 90.00 42.00 18.00 $216.00 Operating Levels (% of capacity) 70% 75% 40,600 609,000 $1,705,200 783,000 $ 2,408,200 43,500 652,500 $ 1,827,000 783,000 $ 2,610,000 BOX 46,400 606,000 During the current month, the company operated at 70% of capacity, direct labor of 575,000 hours were used, and the following actual overhead costs were incurred. $ 1,948,800 783,000 $ 2,731,800 1. Compute the total variable overhead variance and identify it as favorable or unfavorable (Indicate the effect of the variance by selecting 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 selecting favorable, unfavorable, or no variance.)
Chapter1: Financial Statements And Business Decisions
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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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[The following information applies to the questions displayed below]
Sedona Company set the following standard costs for one unit of its product for this year.
Direct material (20 pounds @ $3.30 per pound)
Direct labor (15 hours @ $6.00 per DLH)
Variable overhead (15 hours @ $2.80 per DLH)
Fixed overhead (15 hours @ $1.20 per DLH)
Standard cost per unit
The $4.00 ($2.80+ $1.20) total overhead rate per direct labor hour (DLH) is based on a predicted activity level of 43,500
units, which is 75% of the factory's capacity of 58,000 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
$ 66.00
90.00
42.00
18.00
$ 216.00
$1,624,000
866,000
$ 2,490,000
Operating Levels (% of capacity)
75%
70%
40,600
609,000
$ 1,705, 200
783,000
$2,488,200
43,500
652,500
$ 1,827,000
783,000
$ 2,610,000
Box
46,400
606,000
During the current month, the company operated at 70% of capacity, direct labor of 575,000 hours were used, and the
following actual overhead costs were incurred.
$ 1,948,800
783,000
$ 2,731,800
1. Compute the total variable overhead variance and identify it as favorable or unfavorable. (Indicate the effect of the variance by
selecting 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
selecting favorable, unfavorable, or no variance.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9725cc1b-f335-48f9-9f97-e97fdb64f6df%2Ff1682e63-7add-461d-aa54-df6d81748480%2F6to1u1a_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below]
Sedona Company set the following standard costs for one unit of its product for this year.
Direct material (20 pounds @ $3.30 per pound)
Direct labor (15 hours @ $6.00 per DLH)
Variable overhead (15 hours @ $2.80 per DLH)
Fixed overhead (15 hours @ $1.20 per DLH)
Standard cost per unit
The $4.00 ($2.80+ $1.20) total overhead rate per direct labor hour (DLH) is based on a predicted activity level of 43,500
units, which is 75% of the factory's capacity of 58,000 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
$ 66.00
90.00
42.00
18.00
$ 216.00
$1,624,000
866,000
$ 2,490,000
Operating Levels (% of capacity)
75%
70%
40,600
609,000
$ 1,705, 200
783,000
$2,488,200
43,500
652,500
$ 1,827,000
783,000
$ 2,610,000
Box
46,400
606,000
During the current month, the company operated at 70% of capacity, direct labor of 575,000 hours were used, and the
following actual overhead costs were incurred.
$ 1,948,800
783,000
$ 2,731,800
1. Compute the total variable overhead variance and identify it as favorable or unfavorable. (Indicate the effect of the variance by
selecting 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
selecting favorable, unfavorable, or no variance.)
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