Watson Foods processes bags of organic frozen fruits sold at specialty grocery stores More Info - Requirements The company allocates manufacturing overhead based on direct labor hours. Watson has budgeted fixed manufacturing overhead for the year to be $634,000. The predetermined fixed manufacturing overhead rate is $16.40 per direct labor hour, while the standard variable manufacturing overhead rate is $1.00 per direct labor hour. The direct labor standard for each case is one-quarter (0.25) of an hour. 1. How much variable overhead would have been allocated to production? How much fixed overhead would have been allocated to production? 2. Compute the variable MOH rate variance and the variable MOH efficiency variance. What do these variances tell managers? 3. Compute the fixed MOH budget variance and the fixed overhead volume variance. What do these variances tell managers? The company actually processed 160,000 cases of frozen organic fruits during the year and incurred $692,340 of manufacturing overhead. Of this amount, $638,000 was fixed. The company also incurred a total of 41,800 direct labor hours. Requirement 1. How much variable overhead would have been allocated to production? How much fixed overhead would have been allocated to production? The variable overhead allocated to production is $ Now determine the fixed overhead allocated to production. The fixed overhead allocated to production is $ Requirement 2. Compute the variable MOH rate variance and the variable MOH efficiency variance. What do these variances tell managers? Begin by determing the formula for the variable MOH rate variance, then calculate the variable overhead rate variance. (Enter the result as a positive number. Enter rates to two decimal places. Label the variance as favorable (F) or unfavorable (U).) Variable overhead rate variance x This variance tells managers that Watson Foods actually incurred V on variable manufacturing overhead than they would have expected given the actual hours used. Now determine the formula for the variable MOH efficiency variance, then calculate the efficiency variance. (Enter the result as a positive number. Enter any rates to two decimal places. Label the variance as favorable (F) or unfavorable (U).) Variable overhead efficiency variance X This variance tells managers that Watson Foods used V direct labor hours than anticipated for the actual volume of output. Requirement 3. Compute the fixed MOH budget variance and the fixed overhead volume variance. What do these variances tell managers? Begin by determing the formula for the fixed MOH budget variance, then calculate the fixed budget variance. (Enter the result as a positive number. Label the variance as favorable (F) or unfavorable (U).) Fixed MOH = budget variance This variance tells us that Watson Foods spent than anticipated on fixed overhead costs. Now determine the formula for the fixed overhead volume variance, then calculate the volume variance. (Enter the result as a positive number. Label the variance as favorable (F) or unfavorable (U).) Fixed MOH = volume variance This variance tells managers that Watson Foods produced cases of frozen organic fruits than originally expected
