6. Superior Fender uses a standard cost system and provide the following information: (Click the icon to view the information. Superior Fender allocates manufacturing overhead to production based on standard direct labor hours. Superior Fender reported the following actual results for 2018: actual number of fenders produced, 20,000, actual variable overhead, 54,610; actual fixed overhead, $35,000, actual direct labor hours, 380. Read the requirements Requirement 1. Compute the overhead variances for the year: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance. Begin with the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances, and identify whether each variance is favorable (F) or unfavorable (U). (You may need to simply the formula based on the data provided. Abbreviations used: AC = actual cost; AQ = actual quantity, FOH = fixed overhead; SC = standard cost; SQ = standard quantity; VOH = variable overhead.) Formula Variance (2) VOH cost variance (1) Actual FOH - Allocated FOH (4) VOH efficiency variance (3) (AQ - SQ) X SC Now compute the fixed overhead cost and volume variances. Select the required formulas, compute the fixed overhead cost and volume variances, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.) Formula Variance (6) FOH cost variance (5) (8) FOH volume variance (7) Requirement 2. Explain why the variances are favorable or unfavorable. The variable overhead cost variance is (9) because management spent (10) than budgeted for the actual production. The variable overhead efficiency variance is (11) because management used (12) direct labor hours than standard and variable overhead is applied (incurred) based on direct labor. The fixed overhead cost variance is (13) because management spent (14) than the amount budgeted for fixed overhead. The fixed overhead volume variance is (15). because management allocated (16) fixed overhead to jobs than was budgeted. Static budget variable overhead Static budget fixed overhead Static budget direct labor hours Static budget number of units Standard direct labor hours $ 2.875 $ 23,000 575 hours 25,000 units 0.023 hours per fender 2. Compute the overhead ances for year. variable overnead cost variance, Variable overead emiciency variance, Txed overnead cost Variance, and fixed overead volume variance. Explain why the variances are favorable or unfavorable. (1) O O (AQ - SQ)X SC O (AC-SC) x AQ O Actual FOH - Allocated FOH O (AC-SC) x SQ Actual FOH - Budgeted FOH O (AQ - SQ) XAC O Bugeted FOH - Allocated FOH (2) O OF OU (3) O O (AQ - SQ)X SC O (AC-SC)xAQ O Actual FOH - Allocated FOH O (AC-SC) x SQ Actual FOH - Budgeted FOH O (AQ - SQ)XACO Bugeted FOH - Allocated FOH (4) O OF OU (9) O unfavorable O favorable (5) O O (AQ - SQ)X SC O (AC-SC) AQ Actual FOH - Allocated FOH O (AC-SC) SQ Actual FOH - Budgeted FOH O (AQ - SQ)X AC Bugeted FOH - Allocated FOH (6) O OF OU (7) O O (AQ - SQ)X SC O (AC-SC) XAQ Actual FOH - Allocated FOH O (AC-SC) SQ Actual FOH - Budgeted FOH O (AQ - SQ)X AC Bugeted FOH - Allocated FOH (8) O OF OU (10) O more o less (11) O favorable O unfavorable (12) O fewer O more (13) O unfavorable O favorable (14) O more o less (15) O unfavorable O favorable (16) O less O more
