Connect 1-Semester Access Card for Managerial Accounting: Creating Value in a Dynamic Business Environment (NEW!!)
11th Edition
ISBN: 9781259727788
Author: Hilton & Platt
Publisher: MCG
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Chapter 11, Problem 38P
Newark Plastics Corporation developed its
A total of 66,000 units requiring 315,000 machine hours were produced during May. Actual over head costs for May amounted to $375,000. The actual costs, as compared to the annual budget and to one-twelfth of the annual budget, are as follows:
Required:
- 1. Prepare a schedule showing the following amounts for Newark Plastics for May.
- a. Applied overhead costs.
- b. Variable-overhead spending variance.
- c. Fixed-overhead
budget variance . - d. Variable-overhead efficiency variance.
- e. Fixed-overhead volume variance.
Where appropriate, be sure to indicate whether each variance is favorable or unfavorable.
- 2. Draw a graph similar to Exhibit 11–7 to depict the variable-overhead variances.
- 3. Why does your graph differ from Exhibit 11–7, other than the fact that the numbers differ?
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Newark Plastics Corporation developed its overhead application rate from the annual budget. The budget is based on an expected
total output of 648,000 units requiring 3,240,000 machine hours. The company is able to schedule production uniformly throughout
the year. Machine hours is the cost driver for overhead costs.
A total of 64,800 units requiring 275,400 machine hours were produced during May. Actual overhead costs for May amounted to
$607,800. The actual costs, as compared to the annual budget and to one-twelfth of the annual budget, are as follows:
NEWARK PLASTICS CORPORATION
Annual Budget
Total
Amount
Per
Unit
Per
Machine
Hour
Monthly
Budget
Actual Costs
for May
Variable overhead:
$1,879,200
1,231,200
$ 2.90
1.90
$174,600
$0.58
0.38
$156,600
102,600
102,600
Indirect material
Indirect labor
Fixed overhead:
Supervision
Utilities
Depreciation
1,036,800
1.60
0.32
86,400
80,400
972,000
1.50
0.30
81,000
99,000
1,814,400
2.80
0.56
151,200
151,200
$607,800
Total
$6,933,600
$10.70
$2.14…
Zepol Company is planning to produce 600,000 power drills for the coming year. The company uses direct labor hours to assign overhead to products. Each drill requires 0.75 standard hour of labor for completion. The total budgeted overhead was $1,777,500. The total fixed overhead budgeted for the coming year is $832,500. Predetermined overhead rates are calculated using expected production, measured in direct labor hours. Actual results for the year are:
Actual Production (units)
592,000
Actual variable overhead
$928,000
Actual direct labor hours
446,000
Actual fixed overhead
$935,600
Required:
Compute the applied fixed overhead.
Compute the fixed overhead spending and volume variances.
Compute the applied variable overhead.
Compute the variable overhead spending and efficiency variances.
Oerstman, Inc. uses a standard costing system and develops its overhead rates from the current annual budget.
The budget is based on an expected annual output of 120,000 units requiring 480,000 direct labor hours.
(Practical capacity is 500,000 hours)
Annual budgeted overhead costs total $772,800, of which $556,800 is fixed overhead.
A total of 119,300 units, using 478,000 direct labor hours, were produced during the year.
Actual variable overhead costs for the year were $260,400 and actual fixed overhead costs were $555,450.
Required:
1. Compute the Fixed Overhead Spending variance and indicate if favorable or unfavorable.
2. Compute the Fixed Overhead Volume variance and indicate if favorable or unfavorable.
Chapter 11 Solutions
Connect 1-Semester Access Card for Managerial Accounting: Creating Value in a Dynamic Business Environment (NEW!!)
Ch. 11 - Distinguish between static and flexible budgets.Ch. 11 - Explain the advantage of using a flexible budget.Ch. 11 - Why are flexible overhead budgets based on...Ch. 11 - Distinguish between a columnar and a formula...Ch. 11 - Show, using T-accounts, how production overhead is...Ch. 11 - How have advances in manufacturing technology...Ch. 11 - What is the interpretation of the...Ch. 11 - Jeffries Companys only variable-overhead cost is...Ch. 11 - What is the interpretation of the...Ch. 11 - Distinguish between the interpretations of the...
Ch. 11 - What is the fixed-overhead budget variance?Ch. 11 - What is the correct interpretation of the...Ch. 11 - Describe a common but misleading interpretation of...Ch. 11 - Draw a graph showing budgeted and applied fixed...Ch. 11 - What types of organizations use flexible budgets?Ch. 11 - What is the conceptual problem of applying fixed...Ch. 11 - Distinguish between the control purpose and the...Ch. 11 - Why are fixed-overhead costs sometimes called...Ch. 11 - Draw a graph showing both budgeted and applied...Ch. 11 - Give one example of a plausible activity base to...Ch. 11 - Explain how an activity-based flexible budget...Ch. 11 - Crystal Glassware Company has the following...Ch. 11 - Refer to the data in the preceding exercise. Use...Ch. 11 - Crystal Glassware Company has the following...Ch. 11 - The following data are the actual results for...Ch. 11 - Evening Star, Inc. produces binoculars of two...Ch. 11 - The controller for Rainbow Childrens Hospital,...Ch. 11 - You recently received the following note from the...Ch. 11 - You brought your work home one evening, and your...Ch. 11 - Refer to DCdesserts.coms activity-based flexible...Ch. 11 - Montoursville Control Company, which manufactures...Ch. 11 - Prob. 33ECh. 11 - The following data pertain to Aurora Electronics...Ch. 11 - Calgary Paper Company produces paper for...Ch. 11 - Gibralter Insurance Company uses a flexible...Ch. 11 - Country time Studios is a recording studio in...Ch. 11 - Newark Plastics Corporation developed its overhead...Ch. 11 - Johnson Electrical produces industrial ventilation...Ch. 11 - Fall City Hospital has an outpatient clinic....Ch. 11 - Maxwell Company uses a standard cost accounting...Ch. 11 - Mark Fletcher, president of SoftGro, Inc., was...Ch. 11 - LawnMate Company manufactures power mowers that...Ch. 11 - For each of the following independent Cases A and...Ch. 11 - Prob. 45PCh. 11 - Prob. 46PCh. 11 - WoodCrafts, Inc. is a manufacturer of furniture...Ch. 11 - Rutherford Wheel and Axle, Inc. has an automated...Ch. 11 - Chillco Corporation produces containers of frozen...Ch. 11 - Montreal Scholastic Supply Company uses a...Ch. 11 - College Memories, Inc. publishes college...Ch. 11 - While Mountain Sled Company manufactures childrens...Ch. 11 - Cleveland Computer Accessory Company (CCAC)...Ch. 11 - Prob. 54CCh. 11 - Prob. 55C
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