Question
Codera Inc. Inc. employs a standard costing system. The company has capacity to produce 900,000 units per year and applies overhead is applied on the
Codera Inc. Inc. employs a standard costing system. The company has capacity to produce 900,000 units per year and applies overhead is applied on the basis of direct labour hours. The standard costing system allows two direct labour hours per unit produced. For 2022, the company budgeted variable overhead to be $4,680,000 and fixed overhead to be $4,050,000. Actual results for the year are as follows: Units produced 920,000 Direct labour hours used 1,995,000 Variable overhead $5,147,100 Fixed overhead $4,200,000 Required: (A) Compute the predetermined variable overhead rate (SVOR). (B) Compute the variable overhead spending variance and the variable overhead efficiency variance and indicate whether each variance is favourable or unfavourable. (C) Compute the predetermined fixed overhead rate (SFOR). (D) Compute the applied fixed overhead. [Note, you will need to compute and use the Standard Hours in your calculation.] (E) Compute the fixed overhead spending variance and the fixed overhead volume variance. (F) How do the variable overhead variances and the fixed overhead variances help managers (i.e., what do the variances tell us)?
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