AshfordAshford

Foods processes bags of organic frozen fruits sold at specialty grocery stores.

(Click the icon to view additional information.)Read the requirements

.

Requirement 1. How much variable overhead would have been allocated to production? How much fixed overhead would have been allocated to production?

The variable overhead allocated to production is $

20,250

.

Now determine the fixed overhead allocated to production.

The fixed overhead allocated to production is $

672,300

.

Requirement 2. Compute the variable MOH rate variance and the variable MOH efficiency variance. What do these variances tell managers?

Begin by determing the formula for the variable MOH rate variance, then calculate the variable overhead rate variance. (Enter the result as a positive number. Enter rates to two decimal places. Label the variance as favorable (F) or unfavorable (U).)

								Variable overhead
	Actual hours	x (	Standard rate	-	Actual rate	)	=	rate variance
	41,600	x (	.5	-	.25	)	=	10,400	U

This variance tells managers that

AshfordAshford

Foods actually incurred

more

less

more

on variable manufacturing overhead than they would have expected given the actual hours used.

Now determine the formula for the variable MOH efficiency variance, then calculate the efficiency variance. (Enter the result as a positive number. Enter any rates to two decimal places. Label the variance as favorable (F) or unfavorable (U).)

								Variable overhead
		x (		-		)	=	efficiency variance
		x (		-		)	=

This variance tells managers that

AshfordAshford

Foods used

less

more

direct labor hours than anticipated for the actual volume of output.

Requirement 3. Compute the fixed MOH budget variance and the fixed overhead volume variance. What do these variances tell managers?

Begin by determing the formula for the fixed MOH budget variance, then calculate the fixed budget variance. (Enter the result as a positive number. Label the variance as favorable (F) or unfavorable (U).)

					Fixed MOH
		-		=	budget variance
		-		=

This variance tells us that

AshfordAshford

Foods spent

less

more

than anticipated on fixed overhead costs.

Now determine the formula for the fixed overhead volume variance, then calculate the volume variance. (Enter the result as a positive number. Label the variance as favorable (F) or unfavorable (U).)

					Fixed MOH
		-		=	volume variance
		-		=

This variance tells managers that

AshfordAshford

Foods produced

more

less

cases of frozen organic fruits than originally expected.

Choose from any list or enter any number in the input fields and then continue to the next question.

The company allocates manufacturing overhead based on direct labor hours. Ashford has budgeted fixed manufacturing overhead for the year to be $631,000. The predetermined fixed manufacturing overhead rate is $16.60 per direct labor hour, while the standard variable manufacturing overhead rate is $0.50 per direct labor hour. The direct labor standard for each case is one - quarter (0.25) of an hour. The company actually processed 162,000 cases of frozen organic fruits during the year and incurred $706,080 of manufacturing overhead. Of this amount, $652,000 was fixed. The company also incurred a total of 41,600 direct labor hours. Requirement 2. Compute the variable MOH rate variance and the variable MOH efficiency variance. What do these variances tell managers? Begin by determing the formula for the variable MOH rate variance, then calculate the variable overhead rate variance. (Enter the result as a positive number. Enter rates to two decimal places. Label the variance as favorable (F) or unfavorable (U).) Variable overhead Actual hours Standard rate Actual rate ) rate variance x( xa 41,600 .5 .25 = 10,400 U This variance tells managers that Ashford Foods actually incurred more on variable manufacturing overhead than they would have expected given the actual hours used. This variance tells managers that Ashford Foods actually incurred more on variable manufacturing overhead than they would have expected given the actual hours used. Now determine the formula for the variable MOH efficiency variance, then calculate the efficiency variance. (Enter the result as a positive number. Enter any rates to two decimal places. Label the variance as favorable (F) or unfavorable (U).) Variable overhead x( = efficiency variance x( Requirement 3. Compute the fixed MOH budget variance and the fixed overhead volume variance. What do these variances tell managers? Begin by determing the formula for the fixed MOH budget variance, then calculate the fixed budget variance. (Enter the result as a positive number. Label the variance as favorable (F) or unfavorable (U).) Fixed MOH = budget variance This variance tells us that Ashford Foods spent than anticipated on fixed overhead costs. Now determine the formula for the fixed overhead volume variance, then calculate the volume variance. (Enter the result as a positive number. Label the variance as favorable (F) or unfavorable (U).) Fixed MOH volume variance = This variance tells managers that Ashford Foods produced cases of frozen organic fruits than originally expected