Question
ACME manufacturing is a low-cost producer of a single, commodity product: RGL-01. Standard overhead cost information for one unit of this product is presented below:
ACME manufacturing is a low-cost producer of a single, commodity product: RGL-01. Standard overhead cost information for one unit of this product is presented below:
Standard number of machine hours per unit produced | 0.5 | |
Standard variable overhead rate per machine hour | $ | 30.00 |
Budgeted fixed overhead (for the year) | $ | 580,000 |
Practical capacity, in units (annual basis) | 10,000 | |
Budgeted output for the coming year, in units | 8,000 | |
Normal capacity, in units (per year) | 9,000 | |
Actual production for the year (in units) | 9,200 | |
Actual overhead costs incurred during the year: | ||
Fixed overhead | $ | 556,800 |
Variable overhead | $ | 148,200 |
Actual number of machine hours per unit for work done this period | 0.49 |
Required:
1. Calculate the fixed overhead application rate per machine hour using (a) budgeted output, (b) normal capacity, and (c) practical capacity. (Round your answers to 2 decimal places.)
2. What is the total overhead application rate per machine hour for each of the three choices identified in requirement 1? (Round your answers to 2 decimal places.)
3. What is the total overhead variance for the year when the overhead application rate per machine hour is determined under each of the following options: (a) budgeted output, (b) normal capacity, and (c) practical capacity? Indicate whether each variance is favorable (F) or unfavorable (U). (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)
4. What is causing the results you observe in requirement 3?
5. What is the Overhead Efficiency Variance (= Variable Overhead Efficiency Variance) for the year when the overhead application rate per machine hour is determined under each of the following options: (a) budgeted output, (b) normal capacity, and (c) practical capacity? Indicate whether each variance is favorable (F) or unfavorable (U).
6. Provide an interpretation of the results reported in requirement 5.
7. What is the total Overhead Spending Variance for the year under each of the following assumptions regarding the denominator activity level used to set the overhead application rate for the year:
a) budgeted output, (b) normal capacity, and (c) practical capacity? State whether each variance is favorable (F) or unfavorable (U).
8. Break down the Total Overhead Spending Variance (as determined in requirement 7) into: (a) a Fixed Overhead Spending Variance, and
(b) a Variable Overhead Spending Variance. State whether each variance is favorable (F) or unfavorable (U).
9. Provide an interpretation of the results reported in requirements 7 and 8
Check my work mode : This shows what is correct or incorrect for the work you have completed so far. lt does not nd cate completi Return to question Required: 1. Calculate the fixed overhead application rate per machine hour using (a) budgeted output, (b) normal capacity, and (c) practical capacity. (Round your answers to 2 decimal places.) 2. What is the total overhead application rate per machine hour for each of the three choices identified in requirement 1? (Round your answers to 2 decimal places.) 3. What is the total overhead variance for the year when the overhead application rate per machine hour is determined under each of the following options: (a) budgeted output, (b) normal capacity, and (c) practical capacity? Indicate whether each variance is favorable (F) or unfavorable (U). (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) Answer is complete but not entirely correct. Budgeted Output Normal Capacity 1. Fixed overhead application rate 2. Total overhead application rate 3. Total overhead variance for the year $ 142.04 $ 179.85 per machine hour126.26per machine hour 113.63 per machine hour per machine hourS 159 86 per machine hour S 143.88 per machine hour 23 Unfavorable 33 Unfavorable13Favorable K Prev6 6 7811 of1 Next >Step by Step Solution
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