The Brimestone Company produces several products. The company’s factory overhead rates were determined in 2000 at its normal activity of 90,000 units (180,000 standard direct labor hours budgeted) per year, as shown here:

Factory Overhead Budget at 90,000 Units Standard Factory (180,000 standard direct Overhead Rates labor hours budgeted) per Hour Variable $180,000 $|
Fixed 540,000 5 Total $720,000 $4 During 2000, 82,500 units were produced and actual factory overhead totaled $702,500 (all of which was paid in cash except depreciation of $300,000 on factory and equipment).
Required: (1) Compute

(a) the total overhead variance,

(b) the overhead budget variance, and

(c) the fixed overhead volume variance.
(2) Using T-accounts, prepare entries to record

(a) factory overhead incurred and

(b) factory overhead applied.
(3) Using T-accounts, prepare the entry to record the overhead budget variance and the fixed overhead volume variance.
17-33. The Sanford Corporation produces a single product and uses a standard cost system.
Fixed and variable overhead costs are applied to this product on a standard machine hour basis. Sanford uses its normal activity of 100,000 standard machine hours to set its standard overhead rates. Summary data from Sanford’s flexible budget are as follows:
Standard Machine Total Overhead Costs Hours per Year Budgeted per Year BO; O00 Pe eee eetatescecterteccslescctistiestetonsctnostoneeea $124,000 132,000 140,000 148,000 The standard machine hour requirement for Sanford’s product is 2 machine hours per unit. Last year 45,000 units were produced, and actual overhead costs were $132,800.
Required: (1) Compute the fixed and variable overhead rates per standard machine hour. (Hint: Total overhead cost is a mixed cost that can be separated into fixed and variable components.)
(2) Compute the amount of fixed overhead cost budgeted at 80,000, 90,000, 100,000, and 110,000 standard machine hours, respectively.
(3) Compute the amount of fixed overhead cost applied at 80,000, 90,000, 100,000, and 110,000 standard machine hours, respectively.
(4) Compute last year’s fixed overhead volume variance.
(5) Draw two lines, one representing the amount of fixed overhead budgeted and the other representing the amount of fixed overhead applied, on a graph using the vertical axis to measure dollars and the horizontal axis to measure standard machine hours. On this graph, show the fixed overhead volume variance computed in (4).
(6) Compute last year’s overhead budget variance.

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