Question
Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced. Practical capacity for the plant is defined as 50,000
Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed overhead costs are $250,000 and the budgeted variable overhead cost rate is $4 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 20,000 units, which took 41,000 machine hours. Actual fixed overhead costs for the year amounted to $245,000 while the actual variable overhead cost per unit was $3.90.
a. Based on the information provided above, what was the fixed overhead spending (budget) variance for the year?
b. What was the fixed overhead production volume variance for the year?
c. Based on the information provided above, what was the variable overhead spending variance for the year?
d. What was the variable overhead efficiency variance for the year?
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