2-Way Overhead Variance Analysis 1. Uncontrollable variance Standard time Less: Normal time Time saved 3,360 hrs. 3,000 hrs. 360 hrs. x Normal fixed overhead rate P10 P3,600 F* 2. Controllable variance Actual overhead P160,000 Less: Budgeted overhead, standard time 164,400 4.400 F** Total variance P8,000 F *Capacity variance P2,000 F **Spending variance P2,000 U Fixed efficiency variance 1,600 F Total P3,600 F Variable efficiency variance 6,400 F Total P4,400 F Exercise 6-15 The August Spring Co. manufactures a single product where standard per unit is as follows: Materials (24 pounds @ P3) Direct labor (2 hours @ P60) Overhead (2 hours @P10) Total *Variable is 40% P72.00 120.00 20.00* P212.00 Actual data for the month of September: 1. Planned production, 7,500 units. 2. Materials put into production, 182,000 pounds. 3. Direct labor, 14,600 hours at P64 per hour. 4. Actual manufacturing overhead, P145,000. 5. Actual purchases, 200,000 pounds @P3.05. 6. Other data: Raw materials, beginning, none. Work in process,Sept1, 150 units (100% complete as to materials,60% converted) Work in process, Sept. 30, 100 units (100% complete as to materials, 75converted) Started in process, 7,850 units REQUIRED: 1. Using FIFO, compute for the materials and conversion equivalent production. 2. Determine the materials and labor variances graphically and by formula. 3. Prepare a flexible overhead budget using the format of page 217. 4. Determine the overhead variances using the 2-way. 5. Prepare the standard cost accounting entries up to the closing of the variances to cost of goods sold. Flexible Overhead Budget Normal Normal Actual Standard Rate/Hr. Standard time for one pair x Normal production x Actual production HOURS Time Time Time 1.2 hrs. 1.2 hrs. 2,500 prs. 2,800 prs. 3,000 3,200 3,360 Fixed overhead P10.00 P30,000 P30,000 P30,000 Variable overhead 40.00 120,000 128,000 134,400 Total overhead P50.00 P150,000 P158,000 P164,400