The condensed form of Nordstrop Company's flexible budget for manufacturing overhead follows: Cost Formula Overhead Costs Variable cost Fixed cost Total overhead cost (per machine-hour) 6,500 $ Machine-Hours Number of units produced 3,550 Actual machine-hours. 7,000 Actual variable overhead costs $ 8,960- Actual fixed overhead costs $ 12,000 1.25 The following information is available for a recent period: 1. The denominator activity of 6,500 machine-hours was chosen to compute the predetermined overhead rate. 2. At the 6,500 standard machine-hours level of activity, the company should produce 3,250 units of product. 3. The company's actual operating results were as follows: Variable rate Fixed rate Predetermined overhead rate 7,500 8,500 $ Required: 1. Compute the predetermined overhead rate and break it down into variable and fixed cost elements. (Round your answers to 2 decimal places.) 8,125 $ 9,375 $10,625 11,700 11,700 11,700 $ 19,825 $21,075 $22,325 Variable overhead spending variance Variable overhead efficiency variance Fixed overhead budget variance Fixed overhead volume variance per MH per MH per MH 2. What were the standard hours allowed for the year's actual output? (Do not round intermediate calculations.) 3. Compute the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances. (Do not round intermediate calculations. Round your answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
The condensed form of Nordstrop Company's flexible budget for manufacturing overhead follows: Cost Formula Overhead Costs Variable cost Fixed cost Total overhead cost (per machine-hour) 6,500 $ Machine-Hours Number of units produced 3,550 Actual machine-hours. 7,000 Actual variable overhead costs $ 8,960- Actual fixed overhead costs $ 12,000 1.25 The following information is available for a recent period: 1. The denominator activity of 6,500 machine-hours was chosen to compute the predetermined overhead rate. 2. At the 6,500 standard machine-hours level of activity, the company should produce 3,250 units of product. 3. The company's actual operating results were as follows: Variable rate Fixed rate Predetermined overhead rate 7,500 8,500 $ Required: 1. Compute the predetermined overhead rate and break it down into variable and fixed cost elements. (Round your answers to 2 decimal places.) 8,125 $ 9,375 $10,625 11,700 11,700 11,700 $ 19,825 $21,075 $22,325 Variable overhead spending variance Variable overhead efficiency variance Fixed overhead budget variance Fixed overhead volume variance per MH per MH per MH 2. What were the standard hours allowed for the year's actual output? (Do not round intermediate calculations.) 3. Compute the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances. (Do not round intermediate calculations. Round your answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero 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:The condensed form of Nordstrop Company's flexible budget for manufacturing overhead follows:
Cost
Formula
Overhead Costs
Variable cost
Fixed cost
Total overhead cost
(per machine-hour) 6,500
$
Machine-Hours
1.25
Number of units produced
3,550
Actual machine-hours.
7,000
Actual variable overhead costs $ 8,960
Actual fixed overhead costs $ 12,000
Variable rate
Fixed rate
Predetermined overhead rate
7,500 8,500
$
$
The following information is available for a recent period:
1. The denominator activity of 6,500 machine-hours was chosen to compute the predetermined overhead rate.
2. At the 6,500 standard machine-hours level of activity, the company should produce 3,250 units of product.
3. The company's actual operating results were as follows:
8,125 $ 9,375 $ 10,625
11,700
19,825 $ 21,075 $22,325
Variable overhead spending variance
Variable overhead efficiency variance
Fixed overhead budget variance
Fixed overhead volume variance
11,700
Required:
1. Compute the predetermined overhead rate and break it down into variable and fixed cost elements. (Round your
answers to 2 decimal places.)
11,700
per MH
per MH
per MH
2. What were the standard hours allowed for the year's actual output? (Do not round intermediate calculations.)
3. Compute the variable overhead spending and efficiency variances and the fixed overhead budget and volume
variances. (Do not round intermediate calculations. Round your answers to 2 decimal places. Indicate the effect of each
variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
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