Question
Superior Fender is a competitor of Premium Fender. Superior Fender also uses a standard cost system and provide the following information: Superior Fender allocates manufacturing
Superior Fender is a competitor of Premium Fender. Superior Fender also uses a standard cost system and provide the following information:
Superior Fender allocates manufacturing overhead to production based on standard direct labor hours.
Superior Fender reported the following actual results for 2016:
actual number of fenders produced, 20,000; actual variable overhead, $6,200; actual fixed overhead, $32,000;
actual direct labor hours, 440.
Data Table
Static budget variable overhead | $3,500 |
|
Static budget fixed overhead | $28,000 | |
Static budget direct labor hours | 700 | hours |
Static budget number of units | 28,000 | units |
Standard direct labor hours | 0.025 | hours per fender |
Begin with the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiencyvariances, and identify whether each variance is favorable (F) or unfavorable(U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixedoverhead; SC = standard cost; SQ = standard quantity; VOH = variableoverhead.)
VOH cost variance= formula=variance
VOH efficiency variance=formula=variance
1. | Compute the overhead variances for the year: variable overhead costvariance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance. |
2. | Explain why the variances are favorable or unfavorable. |
.
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