Question
Fortes Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on
Fortes Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.
The company has reported the following actual results for the product for April:
Required:
a. Compute the materials price variance for April.
b. Compute the materials quantity variance for April.
c. Compute the labor rate variance for April.
d. Compute the labor efficiency variance for April.
Part B (5 marks)
ABC Company uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of machine hours. The company's condensed flexible budget for manufacturing overhead is given below:
| Per Machine Hour | Machine Hours | ||
|
| 20,000 | 25,000 | 30,000 |
Variable Overhead Costs | $3 | $60,000 | $75,000 | $90,000 |
Fixed Overhead Costs |
| $300,000 | $300,000 | $300,000 |
Total Overhead Costs |
| $360,000 | $375,000 | $390,000 |
The denominator level of activity is 30,000 machine hours. Standards call for 2.5 machine hours per unit of output. Actual activity and manufacturing overhead costs for the year are given below:
Units Produced | 12,800 units |
Machine Hours used | 31,600 machine hours |
Overhead Costs incurred: |
|
Variable Costs | $96,000 |
Fixed Costs | $297,000 |
Required:
a) What was the fixed overhead budget variance? (2 marks) b) What was the fixed overhead volume variance? (3 marks)
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