Bright, Inc., 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 2017, budgeted fixed manufacturing overhead cost was $21.000.000. Budgeted variable manufacturing overhead was $12 per machine-hour. The denominator level was 1,000,000 machine-hours. Read the requirements Requirement 2. Suppose that 1,025,000 machine hours were allowed for actual output produced in 2017, but 950,000 actual machine-hours were used. Actual manufacturing overhead was $11,675,000, variable, and $21,100,000, fixed. Compute (a) the variable manufacturing overhead spending and efficiency variances and (b) the fixed manufacturing overhead spending and production-volume variances. (a) Begin by calculating the following amounts for the variable manufacturing overhead. Actual Input Actual Costs Flexible Allocated Incurred Budgeted Rate Budget Overhead Variable MOH $ 11,875,000 $ 11,400,000 $ 12.300,000 $ 12,300,000 Now compute the variable manufacturing overhead spending and efficiency variances. (Label each variance as favorable (F) or unfavorable (U).) Spending variance $ 475,000 U Efficiency variance $ 900,000 F (b) Now compute the following amounts for the fixed manufacturing overhead. Same Budgeted Lump Sum Actual Costs Regardless of Incurred Output Level $ 21,100,000 $ 21,000,000 $ Flexible Budget 21,000,000 $ Allocated Overhead 21,525,000 Fixed MOH Now compute the fixed manufacturing overhead spending and production-volume variances. (Label each variance as favorable (F) or unfavorable (U).) Spending variance $ 100,000 U Production-volume variance $ 525,000 F Requirement 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? The variable manufacturing overhead is The fixed manufacturing overhead is overallocated overallocated by $ by $ 425,000 425,000 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? The flexible-budget variance and under- or overallocated overhead are always the same amount for variable manufacturing overhead, because the flexible-budget amount of variable manufacturing overhead and the allocated amount of variable manufacturing overhead coincide'. In contrast, the budgeted and allocated amounts for fixed manufacturing overhead only coincide when the budgeted input of the allocation base for the actual output level achieved exactly equals the denominator level Requirement 4. Suppose the denominator level was 750,000 rather than 1,000,000 machine-hours. What variances in requirement 2 would be affected? Recompute them. Begin by calculating the variable manufacturing overhead spending and efficiency variances. (Label each variance as favorable (F) or unfavorable (U).) Spending variance Efficiency variance Choose from any list or enter any number in the input fields and then click Check Answer. Bright, Inc., 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 2017, budgeted fixed manufacturing overhead cost was $21.000.000. Budgeted variable manufacturing overhead was $12 per machine-hour. The denominator level was 1,000,000 machine-hours. Read the requirements Requirement 2. Suppose that 1,025,000 machine hours were allowed for actual output produced in 2017, but 950,000 actual machine-hours were used. Actual manufacturing overhead was $11,675,000, variable, and $21,100,000, fixed. Compute (a) the variable manufacturing overhead spending and efficiency variances and (b) the fixed manufacturing overhead spending and production-volume variances. (a) Begin by calculating the following amounts for the variable manufacturing overhead. Actual Input Actual Costs Flexible Allocated Incurred Budgeted Rate Budget Overhead Variable MOH $ 11,875,000 $ 11,400,000 $ 12.300,000 $ 12,300,000 Now compute the variable manufacturing overhead spending and efficiency variances. (Label each variance as favorable (F) or unfavorable (U).) Spending variance $ 475,000 U Efficiency variance $ 900,000 F (b) Now compute the following amounts for the fixed manufacturing overhead. Same Budgeted Lump Sum Actual Costs Regardless of Incurred Output Level $ 21,100,000 $ 21,000,000 $ Flexible Budget 21,000,000 $ Allocated Overhead 21,525,000 Fixed MOH Now compute the fixed manufacturing overhead spending and production-volume variances. (Label each variance as favorable (F) or unfavorable (U).) Spending variance $ 100,000 U Production-volume variance $ 525,000 F Requirement 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? The variable manufacturing overhead is The fixed manufacturing overhead is overallocated overallocated by $ by $ 425,000 425,000 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? The flexible-budget variance and under- or overallocated overhead are always the same amount for variable manufacturing overhead, because the flexible-budget amount of variable manufacturing overhead and the allocated amount of variable manufacturing overhead coincide'. In contrast, the budgeted and allocated amounts for fixed manufacturing overhead only coincide when the budgeted input of the allocation base for the actual output level achieved exactly equals the denominator level Requirement 4. Suppose the denominator level was 750,000 rather than 1,000,000 machine-hours. What variances in requirement 2 would be affected? Recompute them. Begin by calculating the variable manufacturing overhead spending and efficiency variances. (Label each variance as favorable (F) or unfavorable (U).) Spending variance Efficiency variance Choose from any list or enter any number in the input fields and then click Check