=+12-32 KK Graphs and overhead variances OBJECTIVES 3, 4 KwikClean Ltd is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine-hours. In 2014, the budgeted fixed manufacturing overhead cost was $17000000.

Budgeted variable manufacturing overhead was $10 per machine-hour. The denominator level was 1000000 machine-hours.

Required 1 Prepare a graph for fixed manufacturing overhead. The graph should display how KwikClean Ltd’s fixed manufacturing overhead costs will be depicted for the purposes of:

(a) planning and control and

(b) inventory costing.

2 Suppose that 1125000 machine-hours were allowed for actual output produced in 2014, but 1150000 actual machine-hours were used. Actual manufacturing overhead was $12075000, variable, and $17100000, fixed. Calculate:

(a) the variable manufacturing overhead spending and efficiency variances and

(b) the fixed manufacturing overhead spending and productionvolume variances. Use the columnar presentation illustrated in Figure 12-4 (p. 482).

3 What is the amount of the under- or overallocated variable manufacturing overhead and the under- or overallocated fixed manufacturing overhead? Why are the flexible-budget variance and the under- or overallocated overhead amount always the same for variable manufacturing overhead but rarely the same for fixed manufacturing overhead?

4 Suppose the denominator level was 1360000 rather than 1000000 machine-hours. What variances in requirement 2 would be affected? Recalculate them.