Question
Overhead (OH) Variances: Better Than That Co. provided the following information regarding Factory Overhead (OH) from its flexible OH budget. The company has an operating
Overhead (OH) Variances: Better Than That Co. provided the following information regarding Factory Overhead (OH) from its flexible OH budget. The company has an operating capacity of 20,000 units and expects to operate at 75% of its productive capacity (i.e. at 15,000 units, which is 75%*20,000):
| Operating Levels (% of capacity) | |||
Flexible OH Budget: | 70% | 75% | 80% | 85% |
Budgeted output (units) | 14,000 | 15,000 | 16,000 | 17,000 |
Budgeted DL hours | 21,000 DLh | 22,500 DLh | 24,000 DLh | 25,500 DLh |
Budgeted OH: |
|
|
|
|
Variable OH | $100,800 | $108,000 | $115,200 | $122,400 |
Fixed OH | $39,375 | $39,375 | $39,375 | $39,375 |
Total OH | $140,175 | $147,375 | $154,575 | $161,775 |
During the current month, the company actually operated at 80% capacity and actually used 23,800 DL hours to produce 16,000 units. The following actual overhead costs were incurred:
Actual Variable OH: $117,400
Actual Fixed OH: $39,000
Actual Total OH: $156,400
- Calculate the predetermined standard OH rate per DL hour for:
- Variable OH
- Fixed OH
- Total OH
- Calculate the Variable OH Cost Variance. Indicate whether this variance is favorable (F) or unfavorable (U).
- Calculate the Fixed OH Volume Variance. Indicate whether this variance is favorable (F) or unfavorable (U).
- Calculate the Fixed OH Cost Variance. Indicate whether this variance is favorable (F) or unfavorable (U).
- Calculate the Total OH Cost Variance. Indicate whether this variance is favorable (F) or unfavorable (U).
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