Walkenhorst Company’s machining department prepared its 2019 budget based on the following data: Practical capacity 40,000 units Standard machine hours per unit 2 Standard variable factory overhead $3.00 per machine hour Budgeted fixed factory overhead $ 400,000 The department uses machine hours to apply factory overhead to production. In 2019, the department used 85,400 machine hours and incurred $659,000 in total manufacturing overhead cost to manufacture 42,040 units. Actual fixed overhead cost for the year was $405,000. Required: Determine for the year: 4. The total overhead spending variance. State whether this variance was favorable (F) or unfavorable (U). 5. The overhead efficiency variance. State whether this variance was favorable (F) or unfavorable (U). 6. The variable overhead spending variance and the fixed overhead spending variance. State whether each variance is favorable (F) or unfavorable (U).
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Walkenhorst Company’s machining department prepared its 2019 budget based on the following data:
| Practical capacity | 40,000 | units | |
| Standard machine hours per unit | 2 | ||
| Standard variable factory overhead | $3.00 | per machine hour | |
| Budgeted fixed factory overhead | $ | 400,000 | |
The department uses machine hours to apply factory overhead to production. In 2019, the department used 85,400 machine hours and incurred $659,000 in total
Required:
Determine for the year:
4. The total overhead spending variance. State whether this variance was favorable (F) or unfavorable (U).
5. The overhead efficiency variance. State whether this variance was favorable (F) or unfavorable (U).
6. The variable overhead spending variance and the fixed overhead spending variance. State whether each variance is favorable (F) or unfavorable (U).
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