Static budget variable overhead $7,500 Static budget fixed overhead $3,000 Static budget direct labor hours 1,500 hours Static budget number of units 7,500 units Longman allocates manufacturing overhead to production based on standard direct labor hours. Last month, Longman reported the following actual results: actual variable overhead, $10,200; actual fixed overhead, $2,820; actual production of 6,900 units at 0.25 direct labor hours per unit. The standard direct labor time is 0.2 direct labor hours per unit (1,500 static direct labor hours / 7,500 static units). 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. 2. Explain why the variances are favorable or unfavorable.
Static budget variable overhead $7,500 Static budget fixed overhead $3,000 Static budget direct labor hours 1,500 hours Static budget number of units 7,500 units Longman allocates manufacturing overhead to production based on standard direct labor hours. Last month, Longman reported the following actual results: actual variable overhead, $10,200; actual fixed overhead, $2,820; actual production of 6,900 units at 0.25 direct labor hours per unit. The standard direct labor time is 0.2 direct labor hours per unit (1,500 static direct labor hours / 7,500 static units). 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. 2. Explain why the variances are favorable or unfavorable.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Topic Video
Question
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Static budget variable
|
$7,500
|
|---|---|
|
Static budget fixed overhead
|
$3,000
|
|
Static budget direct labor hours
|
1,500 hours
|
|
Static budget number of units
|
7,500 units
|
Longman
allocates manufacturing overhead to production based on standard direct labor hours. Last month,
Longman
reported the following actual results: actual variable overhead,
$10,200;
actual fixed overhead,
$2,820;
actual production of
6,900
units at
0.25
direct labor hours per unit. The standard direct labor time is
0.2
direct labor hours per unit
(1,500
static direct labor hours /
7,500
static units).|
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.
|
|
2.
|
Explain why the variances are favorable or unfavorable.
|
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