Superior Fender uses a standard cost system and provide the following information
Transcribed Image Text:ria
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Requirements
st a
th
1. Compute the overhead variances for the year: 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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ble overhead
$5,425
Transcribed Image Text:Superior Fender uses a standard cost system and provide the following information:
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Superior Fender allocates manufacturing overhead to production based on standard direct labor hours. Superior Fender reported the following actual
results for 2024: actual number of fenders produced, 20,000; actual variable overhead, $4,960; actual fixed overhead, $35,000; actual direct labor
hours, 370.
Read the requirements.
Requirement 1. Compute the overhead variances for the year: variable overhead cost variance, variable overhead efficiency variance, fixed overhead
cost variance, and fixed overhead volume variance.
Begin with the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency
variances, and identify whether each variance is favorable (F) or unfavorable (U). (You may need to simply the formula based on the data provided.
Abbreviations used: ÁC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost, SQ = standard quantity; VOH = variable
overhead.)
Formula
Variance
VOH cost variance
(AC - SC) x AQ
VOH efficiency variance
(AQ - SQ) x SC
Data table
Static budget variable overhead
$5,425
Static budget fixed overhead
$31,000
Static budget direct labor hours
775 hours
Static budget number of units
31,000 units
Standard direct labor hours
0.025 hours per fender
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Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.
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