Direct materials (30 Ibs. @ $4 per Ib.)	$	120.00
Direct labor (5 hrs. @ $14 per hr.)		70.00
Factory overheadVariable (5 hrs. @ $8 per hr.)		40.00
Factory overheadFixed (5 hrs. @ $10 per hr.)		50.00
Total standard cost	$	280.00

The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 60,000 units per quarter. The following flexible budget information is available.

	Operating Levels
		70%		80%		90%
Production in units		42,000		48,000		54,000
Standard direct labor hours		210,000		240,000		270,000
Budgeted overhead
Fixed factory overhead	$	2,400,000	$	2,400,000	$	2,400,000
Variable factory overhead	$	1,680,000	$	1,920,000	$	2,160,000

During the current quarter, the company operated at 90% of capacity and produced 54,000 units of product; actual direct labor totaled 265,000 hours. Units produced were assigned the following standard costs.

Direct materials (1,620,000 Ibs. @ $4 per Ib.)	$	6,480,000
Direct labor (270,000 hrs. @ $14 per hr.)		3,780,000
Factory overhead (270,000 hrs. @ $18 per hr.)		4,860,000
Total standard cost	$	15,120,000

Actual costs incurred during the current quarter follow.

Direct materials (1,615,000 Ibs. @ $4.10 per lb.)	$	6,621,500
Direct labor (265,000 hrs. @ $13.75 per hr.)		3,643,750
Fixed factory overhead costs		2,350,000
Variable factory overhead costs		2,200,000
Total actual costs	$	14,815,250

Problem 08-5AA Expanded overhead variances LO P5

(a) Compute the variable overhead spending and efficiency variances. (b) Compute the fixed overhead spending and volume variances. (c) Compute the total overhead controllable variance.

Actual Variable OH Cost			-1	Flexible Budget			-1	Standard Cost (VOH applied)
Actual hours	x	Actual variable rate		Actual hours	x	Standard variable rate		Standard hours	x	Standard variable rate
265,000	x			265,000	x	$8.00		270,000	x	$8.00
					$2,120,000				$2,160,000
				2			$40,000
-1
Variable overhead spending variance				$0	Unfavorable
Variable overhead efficiency variance				40,000	Favorable
Total variable overhead variance					Unfavorable

Actual Fixed OH Cost			-1	Budgeted Overhead			-1	Standard Cost (FOH applied)
Actual hours	x	Actual fixed rate						Standard hours	x	Standard fixed rate
265,000	x							270,000	x	$10.00
									$2,700,000
				2
-1
				$0
				0

Overhead Controllable Variance
Fixed overhead spending variance
Variable overhead efficiency variance
Variable overhead spending variance
Total overhead controllable variance