Groovy Bottles is a manufacturer of ceramic bottles.

Data Table:

The company has these standards:

Direct materials (clay). . . . . . . . . . . . . . . . .1.3 kg per bottle, at a cost of $0.44 per kgDirect labour. . . . . . . . . . . . . . . . . . . . . . . . .1/5 hour per bottle, at a cost of $14.00 per hourStatic budget variable overhead. . . . . . . . .$70,400Static budget fixed overhead. . . . . . . . . . . .$29,700Static budget direct labour hours. . . . . . . . .10,000 hoursStatic budget number of bottles. . . . . . . . . .50,000

Groovy Bottles allocates manufacturing overhead to production based on standard direct labour hours.

Data Table:

Last month,

Groovy Bottles

reported the following actual results for the production of

67,000

bottles:

Direct materials. . . . . . . . . . . . . . . . . . . .1.6 kg per bottle, at a cost of $0.80 per kgDirect labour. . . . . . . . . . . . . . . . . . . . . .1/4 hour per bottle, at a cost of $12.70 per hourActual variable overhead. . . . . . . . . . . .$91,000Actual fixed overhead. . . . . . . . . . . . . . .$28,100

Requirement 1. Compute the total manufacturing overhead variance. What does this tell management?

Identify the formula labels and compute the total manufacturing overhead variance. (Enter the result as a positive number. Label the variance as favourable (F) or unfavourable (U).)

Total overhead variance: Actual overhead cost Standard overhead allocated to production Total overhead variance

Part 2

What does the total manufacturing overhead variance tell management?

This variance tells managers that Groovy Bottles overallocated /underallocated manufacturing overhead by $

Requirement 2. Compute the overhead flexible budget variance. What does this tell management?

Identify the formula labels and compute the overhead flexible budget variance. (Enter the result as a positive number. Label the variance as favourable (F) or unfavourable (U).)

Overhead flexible budget variance: Actual overhead cost Flexible budget overhead for actual outputs Overhead flexible budget variance

What does the overhead flexible budget variance tell management?

This variance tells managers that Groovy Bottles actually incurred $

Less / more for manufacturing overhead than they would have expected for the actual volume produced during the year.

Requirement 3. Compute the production volume variance. What does this tell management?

Identify the formula labels and compute the production volume variance. (Enter the result as a positive number. Label the variance as favourable (F) or unfavourable (U).)

Production volume variance: Flexible budget overhead for actual outputs Standard overhead allocated to production Production volume variance

Part 6

What does the production volume variance tell management?

This variance tells managers that $ of the total overhead variance arose because

Groovy Bottles produced More / less bottles than originally expected. It is unfavourable / favourable, because Groovy Bottles used its plant capacity less efficiently than / more efficiently thanoriginally anticipated.