The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing (factory) overhead. The firm traces all direct costs to products, and it assigns overhead cost to products based on direct labor hours. The company budgeted $10,000 variable factory overhead cost and 2,500 direct labor hours to manufacture 5,000 pairs of boots in March. The factory used 4,700 direct labor hours in March to manufacture 4,800 pairs of boots and spent $17,800 on variable overhead during the month. For March, the Platter Valley factory of Bybee Industries budgeted $92,500 for fixed factory overhead cost. Its practical capacity is 2,500 direct labor hours per month (to manufacture 5,000 pairs of boots). The factory used 4,700 direct labor hours in March to manufacture 4,800 pairs of boots. The actual fixed overhead cost incurred for the month was $96,500. 1. Compute the total flexible-budget variance for overhead and the production volume variance for March. What was the total factory overhead cost variance for March? Indicate whether each variance is favorable (F) or unfavorable (U). 2. Determine the three components of the total flexible-budget variance for overhead (i.e., the variable overhead spending variance, the variable overhead efficiency variance, and the fixed overhead spending variance); in addition, show the production volume variance for March. Indicate whether each variance is favorable (F) or unfavorable (U).
The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing (factory) overhead. The firm traces all direct costs to products, and it assigns overhead cost to products based on direct labor hours. The company budgeted $10,000 variable factory overhead cost and 2,500 direct labor hours to manufacture 5,000 pairs of boots in March. The factory used 4,700 direct labor hours in March to manufacture 4,800 pairs of boots and spent $17,800 on variable overhead during the month. For March, the Platter Valley factory of Bybee Industries budgeted $92,500 for fixed factory overhead cost. Its practical capacity is 2,500 direct labor hours per month (to manufacture 5,000 pairs of boots). The factory used 4,700 direct labor hours in March to manufacture 4,800 pairs of boots. The actual fixed overhead cost incurred for the month was $96,500. 1. Compute the total flexible-budget variance for overhead and the production volume variance for March. What was the total factory overhead cost variance for March? Indicate whether each variance is favorable (F) or unfavorable (U). 2. Determine the three components of the total flexible-budget variance for overhead (i.e., the variable overhead spending variance, the variable overhead efficiency variance, and the fixed overhead spending variance); in addition, show the production volume variance for March. Indicate whether each variance is favorable (F) or unfavorable (U).
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 Platter Valley factory of Bybee Industries manufactures field boots. The cost
of each boot includes direct materials, direct labor, and manufacturing (factory)
overhead. The firm traces all direct costs to products, and it assigns overhead
cost to products based on direct labor hours.
The company budgeted $10,000 variable factory overhead cost and 2,500 direct
labor hours to manufacture 5,000 pairs of boots in March.
The factory used 4,700 direct labor hours in March to manufacture 4,800 pairs
of boots and spent $17,800 on variable overhead during the month.
For March, the Platter Valley factory of Bybee Industries budgeted $92,500 for
fixed factory overhead cost. Its practical capacity is 2,500 direct labor hours per
month (to manufacture 5,000 pairs of boots).
The factory used 4,700 direct labor hours in March to manufacture 4,800 pairs
of boots. The actual fixed overhead cost incurred for the month was $96,500.
1. Compute the total flexible-budget variance for overhead and the production
volume variance for March. What was the total factory overhead cost variance
for March? Indicate whether each variance is favorable (F) or unfavorable (U).
2. Determine the three components of the total flexible-budget variance for
overhead (i.e., the variable overhead spending variance, the variable overhead
efficiency variance, and the fixed overhead spending variance); in addition, show
the production volume variance for March. Indicate whether each variance is
favorable (F) or unfavorable (U).
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