Can you show me what the dollar amounts for Spending Variance and Production-Volume Variance must be or look like to be considered overallocated?

The Quick Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. Variable manufacturing overhead is allocated to products on the basis of standard direct manufacturing labor-hours. (Click the icon to (Click the icon to view the budget data for 2017.) view the additional data for 2017.) i Data Table Direct manufacturing labor use 0.02 hours per baguette Variable manufacturing overhead $10.00 per direct manufacturing labor-hour 1 Data Table Planned (budgeted) output 3,700,000 baguettes Actual production 3,000,000 baguettes Direct manufacturing labor 54,500 hours Actual variable manufacturing overhead $713,950 Read the requirements. i Requirements 1. Prepare a variance analysis of fixed manufacturing overhead cost. 2. Is fixed overhead underallocated or overallocated? By what amount? 3. Comment on your results. Discuss the variances and explain what may be driving them. The Quick Bread Company also allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. For 2017, fixed manufacturing overhead was budgeted at $3.00 per direct manufacturing labor-hour. Actual fixed manufacturing overhead incurred during the year was $288,000 *$3.00-is the-Budgeted-(Planned) fixed manufacturing overhead cost per direct: manufacturing labor-hour. *$288.000 is the Actual fixed manufacturing overhead cost-incurred during the year. Requirement 1. Prepare a variance analysis of fixed manufacturing overhead cost. Begin by completing the table below for the fixed manufacturing overhead that will be used to calculate the variances. 41 *$288,000 is the Actual fixed manufacturing overhead cost-incurred during the year. I Same Budgeted Lump Sum Actual Costs Regardless of Incurred Output Level $ 288,000 $ 222,000 $ Flexible Budget 222,000 $ Allocated Overhead 180,000 Fixed MOH Well done! 4-Variance Analysis Fixed MOH ding Variance 66.000 U Efficiency Variance Production-Volume Variance 42,000 U N Nice work! Requirement 2. Is fixed overhead underallocated or overallocated? By what amount? Fixed manufacturing overhead is underallocated by $ 108,000 Excellent! Requirement 3. Comment on your results. Discuss the variances and explain what may be driving them The production-volume variance captures the difference between the number of budgeted baguettes and the actual number of baguettes produced. Quick Bread Company's spending variance means that the actual aggregate of fixed costs exceeds the budget amount. For example, monthly leasing rates for baguette-making machines may have increased above those in the budget. Good job! Requirement 1. Prepare a variance analysis of fixed manufacturing overhead cost. Begin by completing the table below for the fixed manufacturing overhead that will be used to calculate the variances. Before we can prepare a variance analysis, we need to first calculate some key (important)- amounts that are used in the calculations. --The first amount we will calculate is the fixed. overhead flexible budget amount. Recall the flexible-budget uses budgeted costs at the budgeted input-quantity allowed for actual output. Be sure to calculate the budgeted (planned)-direct-labor-hours by multiplying the budgeted number of units by the budgeted (planned) direct manufacturing-labor-hours per unit (=3,700,000 number of baguettes-x-0.02 hours per baguette) Budgeted (Planned)-labor-hoursFormula 1 =-Total number of a product-x-Total number of hours per product = Budgeted (Planned)-labor-hours *3.700,000 -is-Budgeted (Planned) total number of baguettes. I *0.02 hours per baguette. I =-3,700,000 Budgeted-(Planned) total number of baguettes to produce-x-0.02 hours per baguette =-74.000-Budgeted (Planned)-labor-hours Flexible-BudgetFormula =Budgeted (Planned)-labor-hours-x-Budgeted (Planned) allocation base unit =-Flexible Budget 1 =-74,000-Budgeted (Planned)-labor-hours-x-$3.00-Budgeted (Planned)-labor-hours rate per direct manufacturing-labor-hour 1 =-$222.0000 $222.000 -is the Flexible Budget. I Now calculate the allocated overhead using the following formula. Allocated manufacturing overhead cost-(manufacturing overhead)-Formula 1 =Budgeted-fixed overhead-x Budgeted-labor-hours-x #of products Rate per unit per product + + actually produced (completed) 1 =-Budgeted fixed-overhead-x-Budgeted-labor-hours-x #of baguettes Rate per unit per baguette actually produced (completed) 1 =-Allocated manufacturing overhead-cost (Allocated overhead) - =-$3.00-x-0.02-x-3.000.000-Actual total number of baguettes produced-(completed) =-0.06-x-3,000,000-Actual total number of baguettes produced-(completed) =-$180,000 V$180,000 is the Allocated-total-fixed manufacturing overhead cost. Finish completing the table for the fixed manufacturing overhead amounts. Recall that the amount in columns 2 and 3 are the same value, budgeted fixed manufacturing overhead costs. *$288.000-isthe-Actual-fixed-manufacturing overhead cost-incurred during the year. [Financial information from the Word Problem.] $222,000 is the Flexible:Budget. $180,000 is the Allocated total fixed'manufacturing overhead cost.[ Actual Costs: incurredo Same:Budgeted Flexible Allocated Lump Sum (as Budget:-Same Manufacturing in Static Budgeted overhead cost: Budget) Lump-Sum (as Budgeted Input Regardless of in-Static Quantity:Allowed Output:Levela Budget): for Actual Regardless of Output:x: Output:Levela Budgeted-Ratea $222.0000 $222.0000 $180,0000 $288.0000 Fixed Manufacturing overhead costo The next step is to complete the 4-variance analysis using the amounts you calculated above. Use the following guide to assist you in selecting the correct variance for each category. (Click to view the information.) When all overhead variances are presented together it is called a 4-variance analysis 4-variance analysis using the amounts you calculated above. i - Reference The difference between columns 1 and 2 measures the spending variance. The difference between columns 2 and 3 measures the efficiency variance (if applicable). The difference between columns 3 and 4 measures the production-volume variance (if applicable). Each overhead category will have 2 variances, which is why we call it a 4-variance analysis, but the 4-variance analysis table has three types of variances. That means that for each category of overhead, one of the variances will never occur. Why? Variable overhead does not have a production-volume variance because the amount of variable overhead allocated is always the same as the flexible-budget amount. Variable costs never have any unused capacity. If the production volume decreases the variable overhead decrease. 1 Fixed overhead has no efficiency variance because a lump-sum amount of fixed costs will be unaffected by the degree of operating efficiency in a given budget period. 1 Use the following columnar presentation to assist in the calculation of the variances. a Actual-Costs incurreda Same-Budgeted Flexible Allocated Fixed Lump-Sum (as Budget:-Same Manufacturing: in-Static Budgeted overhead cost: Budget) Lump-Sum (as Budgeted Input Regardless of in-Static Quantity Allowed Output:Levela Budget) for Actual Regardless of Output:x: Output:Levela Budgeted Rated $222,0000 $222,000 $180,0000 $288.0000 Fixed Manufacturing overhead costo Spending Variance Production volume variance Because -$222,000, the Lump Sum-Regardless of Output:Level, is equal to $222,000, the Flexible:Budget, there is never a variance. I 1 1 Production-Volume Variance Formula 1 = Flexible Budget: --Same Budgeted-Lump-Sum (as in Static-Budget) Regardless of Output-Level- -Total-allocated-fixed manufacturing overhead cost 1 = Production-Volume Variance 1 =-$222,000-$180,000 = $42,0001 $42.000 is the Production-Volume-Variance. 1 Because $222,000, the flexible budgeted total fixed manufacturing cost, is-larger than $180,000,- the total fixed manufacturing overhead cost allocated on the basis (foundation) of actual- baguettes, the output (product), produced (completed), there is an unfavorable production- volume variance, also called denominator-level variance. The production-volume variance, also referred to as the denominator-level variance, is the difference between the budgeted and allocated fixed overhead amounts. Note that the allocated overhead can be expressed in terms of allocation-base units (machine-hours for Webb) or in terms of the budgeted fixed cost per unit: 4-Variance Analysisa Spending:Varianced EfficiencyVarianced Production-Volume Variancea Fixed Manufacturing $66,000 UO SO'Never a varianced $42,000 UO overhead costo Requirement 2. Is fixed overhead underallocated or overallocated? By what amount? 1 The variances represent the under-or overallocated overhead. If we had unfavorable variances that means our overhead was underallocated, since our budgeted overhead was less than our actual overhead. If we have favorable variances that means our overhead was overallocated, since our budgeted overhead was greater than our actual overhead. Review the overhead costs you computed above. Click the icon to view the costs) Reference Actual Cost incurreda Same Budgeted Flexible Allocated Fixedo Lump-Sum (as Budget: Same Manufacturing in Static Budgeted overhead cost: Budget) Lump Sum (as Budgeted Input: Regardless of in-Static Quantity Allowed Output Levela Budget) for Actual Regardless of Output:x: Output:Levela Budgeted Rated $222.0000 $222.0000 $180,0000 $288.0000 o Fixed Manufacturing overhead costo The difference between columns 1 and 4 measures the total fixed manufacturing overhead variance. What is Brown Bread Company's total fixed manufacturing overhead variance? Has the company overallocated or underallocated? 4-Variance Analysisa Spending:Variancea Efficiency Variancea Production-Volume Variancea Fixed-Manufacturing 566,000 UO Never a varianced S42,000 UO overhead costo $66,000-U+$42,000-U =-$108.0001 $108,000 is the total fixed manufacturing overhead-cost, and the fixed manufacturing-overhead- kost is underallocated by $108,000.1 Requirement 3. Comment on your results. Discuss the variances and explain what may be driving them 1 The unfavorable production-volume variance-of-$42,000 captures the difference between the number of budgeted 3,700,000 baguettes and the lower actual 3,000,000 baguettes produced the fixed-cost capacity (volume, production, ability) not used. The spending variance of $66,000 unfavorable means that the actual aggregate (grand total) of fixed costs ($180,000). exceeds (surpasses) the budget amount ($222,000). --For example, monthly leasing rates for baguette-making machines may have increased above those in the budget for 2017-1 The Quick Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. Variable manufacturing overhead is allocated to products on the basis of standard direct manufacturing labor-hours. (Click the icon to (Click the icon to view the budget data for 2017.) view the additional data for 2017.) i Data Table Direct manufacturing labor use 0.02 hours per baguette Variable manufacturing overhead $10.00 per direct manufacturing labor-hour 1 Data Table Planned (budgeted) output 3,700,000 baguettes Actual production 3,000,000 baguettes Direct manufacturing labor 54,500 hours Actual variable manufacturing overhead $713,950 Read the requirements. i Requirements 1. Prepare a variance analysis of fixed manufacturing overhead cost. 2. Is fixed overhead underallocated or overallocated? By what amount? 3. Comment on your results. Discuss the variances and explain what may be driving them. The Quick Bread Company also allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. For 2017, fixed manufacturing overhead was budgeted at $3.00 per direct manufacturing labor-hour. Actual fixed manufacturing overhead incurred during the year was $288,000 *$3.00-is the-Budgeted-(Planned) fixed manufacturing overhead cost per direct: manufacturing labor-hour. *$288.000 is the Actual fixed manufacturing overhead cost-incurred during the year. Requirement 1. Prepare a variance analysis of fixed manufacturing overhead cost. Begin by completing the table below for the fixed manufacturing overhead that will be used to calculate the variances. 41 *$288,000 is the Actual fixed manufacturing overhead cost-incurred during the year. I Same Budgeted Lump Sum Actual Costs Regardless of Incurred Output Level $ 288,000 $ 222,000 $ Flexible Budget 222,000 $ Allocated Overhead 180,000 Fixed MOH Well done! 4-Variance Analysis Fixed MOH ding Variance 66.000 U Efficiency Variance Production-Volume Variance 42,000 U N Nice work! Requirement 2. Is fixed overhead underallocated or overallocated? By what amount? Fixed manufacturing overhead is underallocated by $ 108,000 Excellent! Requirement 3. Comment on your results. Discuss the variances and explain what may be driving them The production-volume variance captures the difference between the number of budgeted baguettes and the actual number of baguettes produced. Quick Bread Company's spending variance means that the actual aggregate of fixed costs exceeds the budget amount. For example, monthly leasing rates for baguette-making machines may have increased above those in the budget. Good job! Requirement 1. Prepare a variance analysis of fixed manufacturing overhead cost. Begin by completing the table below for the fixed manufacturing overhead that will be used to calculate the variances. Before we can prepare a variance analysis, we need to first calculate some key (important)- amounts that are used in the calculations. --The first amount we will calculate is the fixed. overhead flexible budget amount. Recall the flexible-budget uses budgeted costs at the budgeted input-quantity allowed for actual output. Be sure to calculate the budgeted (planned)-direct-labor-hours by multiplying the budgeted number of units by the budgeted (planned) direct manufacturing-labor-hours per unit (=3,700,000 number of baguettes-x-0.02 hours per baguette) Budgeted (Planned)-labor-hoursFormula 1 =-Total number of a product-x-Total number of hours per product = Budgeted (Planned)-labor-hours *3.700,000 -is-Budgeted (Planned) total number of baguettes. I *0.02 hours per baguette. I =-3,700,000 Budgeted-(Planned) total number of baguettes to produce-x-0.02 hours per baguette =-74.000-Budgeted (Planned)-labor-hours Flexible-BudgetFormula =Budgeted (Planned)-labor-hours-x-Budgeted (Planned) allocation base unit =-Flexible Budget 1 =-74,000-Budgeted (Planned)-labor-hours-x-$3.00-Budgeted (Planned)-labor-hours rate per direct manufacturing-labor-hour 1 =-$222.0000 $222.000 -is the Flexible Budget. I Now calculate the allocated overhead using the following formula. Allocated manufacturing overhead cost-(manufacturing overhead)-Formula 1 =Budgeted-fixed overhead-x Budgeted-labor-hours-x #of products Rate per unit per product + + actually produced (completed) 1 =-Budgeted fixed-overhead-x-Budgeted-labor-hours-x #of baguettes Rate per unit per baguette actually produced (completed) 1 =-Allocated manufacturing overhead-cost (Allocated overhead) - =-$3.00-x-0.02-x-3.000.000-Actual total number of baguettes produced-(completed) =-0.06-x-3,000,000-Actual total number of baguettes produced-(completed) =-$180,000 V$180,000 is the Allocated-total-fixed manufacturing overhead cost. Finish completing the table for the fixed manufacturing overhead amounts. Recall that the amount in columns 2 and 3 are the same value, budgeted fixed manufacturing overhead costs. *$288.000-isthe-Actual-fixed-manufacturing overhead cost-incurred during the year. [Financial information from the Word Problem.] $222,000 is the Flexible:Budget. $180,000 is the Allocated total fixed'manufacturing overhead cost.[ Actual Costs: incurredo Same:Budgeted Flexible Allocated Lump Sum (as Budget:-Same Manufacturing in Static Budgeted overhead cost: Budget) Lump-Sum (as Budgeted Input Regardless of in-Static Quantity:Allowed Output:Levela Budget): for Actual Regardless of Output:x: Output:Levela Budgeted-Ratea $222.0000 $222.0000 $180,0000 $288.0000 Fixed Manufacturing overhead costo The next step is to complete the 4-variance analysis using the amounts you calculated above. Use the following guide to assist you in selecting the correct variance for each category. (Click to view the information.) When all overhead variances are presented together it is called a 4-variance analysis 4-variance analysis using the amounts you calculated above. i - Reference The difference between columns 1 and 2 measures the spending variance. The difference between columns 2 and 3 measures the efficiency variance (if applicable). The difference between columns 3 and 4 measures the production-volume variance (if applicable). Each overhead category will have 2 variances, which is why we call it a 4-variance analysis, but the 4-variance analysis table has three types of variances. That means that for each category of overhead, one of the variances will never occur. Why? Variable overhead does not have a production-volume variance because the amount of variable overhead allocated is always the same as the flexible-budget amount. Variable costs never have any unused capacity. If the production volume decreases the variable overhead decrease. 1 Fixed overhead has no efficiency variance because a lump-sum amount of fixed costs will be unaffected by the degree of operating efficiency in a given budget period. 1 Use the following columnar presentation to assist in the calculation of the variances. a Actual-Costs incurreda Same-Budgeted Flexible Allocated Fixed Lump-Sum (as Budget:-Same Manufacturing: in-Static Budgeted overhead cost: Budget) Lump-Sum (as Budgeted Input Regardless of in-Static Quantity Allowed Output:Levela Budget) for Actual Regardless of Output:x: Output:Levela Budgeted Rated $222,0000 $222,000 $180,0000 $288.0000 Fixed Manufacturing overhead costo Spending Variance Production volume variance Because -$222,000, the Lump Sum-Regardless of Output:Level, is equal to $222,000, the Flexible:Budget, there is never a variance. I 1 1 Production-Volume Variance Formula 1 = Flexible Budget: --Same Budgeted-Lump-Sum (as in Static-Budget) Regardless of Output-Level- -Total-allocated-fixed manufacturing overhead cost 1 = Production-Volume Variance 1 =-$222,000-$180,000 = $42,0001 $42.000 is the Production-Volume-Variance. 1 Because $222,000, the flexible budgeted total fixed manufacturing cost, is-larger than $180,000,- the total fixed manufacturing overhead cost allocated on the basis (foundation) of actual- baguettes, the output (product), produced (completed), there is an unfavorable production- volume variance, also called denominator-level variance. The production-volume variance, also referred to as the denominator-level variance, is the difference between the budgeted and allocated fixed overhead amounts. Note that the allocated overhead can be expressed in terms of allocation-base units (machine-hours for Webb) or in terms of the budgeted fixed cost per unit: 4-Variance Analysisa Spending:Varianced EfficiencyVarianced Production-Volume Variancea Fixed Manufacturing $66,000 UO SO'Never a varianced $42,000 UO overhead costo Requirement 2. Is fixed overhead underallocated or overallocated? By what amount? 1 The variances represent the under-or overallocated overhead. If we had unfavorable variances that means our overhead was underallocated, since our budgeted overhead was less than our actual overhead. If we have favorable variances that means our overhead was overallocated, since our budgeted overhead was greater than our actual overhead. Review the overhead costs you computed above. Click the icon to view the costs) Reference Actual Cost incurreda Same Budgeted Flexible Allocated Fixedo Lump-Sum (as Budget: Same Manufacturing in Static Budgeted overhead cost: Budget) Lump Sum (as Budgeted Input: Regardless of in-Static Quantity Allowed Output Levela Budget) for Actual Regardless of Output:x: Output:Levela Budgeted Rated $222.0000 $222.0000 $180,0000 $288.0000 o Fixed Manufacturing overhead costo The difference between columns 1 and 4 measures the total fixed manufacturing overhead variance. What is Brown Bread Company's total fixed manufacturing overhead variance? Has the company overallocated or underallocated? 4-Variance Analysisa Spending:Variancea Efficiency Variancea Production-Volume Variancea Fixed-Manufacturing 566,000 UO Never a varianced S42,000 UO overhead costo $66,000-U+$42,000-U =-$108.0001 $108,000 is the total fixed manufacturing overhead-cost, and the fixed manufacturing-overhead- kost is underallocated by $108,000.1 Requirement 3. Comment on your results. Discuss the variances and explain what may be driving them 1 The unfavorable production-volume variance-of-$42,000 captures the difference between the number of budgeted 3,700,000 baguettes and the lower actual 3,000,000 baguettes produced the fixed-cost capacity (volume, production, ability) not used. The spending variance of $66,000 unfavorable means that the actual aggregate (grand total) of fixed costs ($180,000). exceeds (surpasses) the budget amount ($222,000). --For example, monthly leasing rates for baguette-making machines may have increased above those in the budget for 2017-1