Question
Great Fender is a competitor of Superior Fender. Great Fender also uses a standard cost system and provide the followinginformation: Static budget variable overhead $4,608
Great Fender is a competitor of Superior Fender. Great Fender also uses a standard cost system and provide the followinginformation:
Static budget variable overhead $4,608
Static budget fixed overhead $23,040
Static budget direct labor hours 576 hour
Static budget number of units 24,000 units
Standard direct labor hours 0.024 hours per fender
Fender allocates manufacturing overhead to production based on standard direct labor hours. Great Fender reported the following actual results for 2016: actual number of fendersproduced, 20,000; actual variableoverhead, $5,900; actual fixedoverhead, $34,000; actual direct laborhours, 440.
1.Compute the overhead variances for theyear: variable overhead costvariance, variable overhead efficiencyvariance, fixed overhead costvariance, and fixed overhead volume variance.
2.Explain why the variances are favorable or unfavorable.
Begin with the variable overhead cost and efficiency variances. Select the requiredformulas, compute the variable overhead cost and efficiencyvariances, and identify whether each variance is favorable(F) or unfavorable(U). (Abbreviations used: AC= actualcost; AQ= actualquantity; FOH= fixedoverhead; SC= standardcost; SQ= standardquantity; VOH= variableoverhead.)
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