Walkenhorst Company's machining department prepared its 2022 budget based on the following data: Practical capacity Standard machine hours per unit Standard variable factory overhead Budgeted fixed factory overhead 40,000 units 2 $ 3.00 per machine hour $.368,000 The department uses machine hours to apply factory overhead to production. In 2022, the department used 88,000 machine hours and incurred $636,000 in total manufacturing overhead cost to manufacture 43,000 units. Actual fixed overhead cost for the year was $380,000. Required: Determine for the year: 1. The fixed, variable, and total factory overhead application rates (per machine hour). (Round your answers to 2 decimal places.) 2. The total flexible budget, for factory overhead cost based on output achieved in 2022. 3. The production volume variance. State whether this variance was favorable (F) or unfavorable (U). 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).
Walkenhorst Company's machining department prepared its 2022 budget based on the following data: Practical capacity Standard machine hours per unit Standard variable factory overhead Budgeted fixed factory overhead 40,000 units 2 $ 3.00 per machine hour $.368,000 The department uses machine hours to apply factory overhead to production. In 2022, the department used 88,000 machine hours and incurred $636,000 in total manufacturing overhead cost to manufacture 43,000 units. Actual fixed overhead cost for the year was $380,000. Required: Determine for the year: 1. The fixed, variable, and total factory overhead application rates (per machine hour). (Round your answers to 2 decimal places.) 2. The total flexible budget, for factory overhead cost based on output achieved in 2022. 3. The production volume variance. State whether this variance was favorable (F) or unfavorable (U). 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).
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:Walkenhorst Company's machining department prepared its 2022 budget based on the following data:
Practical capacity
Standard machine hours per unit
Standard variable factory overhead
Budgeted fixed factory overhead
The department uses machine hours to apply factory overhead to production. In 2022, the department used 88,000 machine hours
and incurred $636,000 in total manufacturing overhead cost to manufacture 43,000 units. Actual fixed overhead cost for the year was
$380,000.
40,000 units
2
$ 3.00 per machine hour
$368,000
Required:
Determine for the year:
1. The fixed, variable, and total factory overhead application rates (per machine hour). (Round your answers to 2 decimal places.)
2. The total flexible budget, for factory overhead cost based on output achieved in 2022.
3. The production volume variance. State whether this variance was favorable (F) or unfavorable (U).
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).
1. Fixed overhead application rate
Variable overhead application rate
Total factory overhead application rate
2. Total flexible budget for overhead cost
3. Production volume variance
4. Total overhead spending variance
5. Overhead efficiency variance
6. Variable overhead spending variance
Fixed overhead spending variance
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