App8A-121
103. Nova Corporation produces a single product and uses a standard cost system to help
control costs. Overhead is applied to production on the basis of standard machine-hours.
According to the company’s flexible budget, the following overhead costs should be incurred at
an activity level of 18,000 machine-hours (the denominator activity level chosen for the current
year):
Variable overhead costs $45,000
Fixed overhead costs 108,000
Total overhead costs $153,000
During the current year, the following operating results were recorded:
Actual machine-hours worked 15,000
Standard machine-hours allowed 16,000
Actual variable overhead cost incurred $38,000
Actual fixed manufacturing overhead cost incurred $107,100
At the end of the year, the company’s Manufacturing Overhead account showed total debits for
actual overhead costs of $145,100 and total credits of $136,000 for overhead applied. The
difference ($9,100) represents under-applied overhead, the cause of which management would
like to know.
Required:
a. Compute the predetermined overhead rate that would have been used during the year,
showing separately the variable and fixed components of the rate.
b. Show how the $136,000 of overhead actually applied was computed.
c. Analyze the $9,100 under-applied overhead figure in terms of the variable overhead rate and
efficiency variances and the fixed manufacturing overhead budget and volume variances.
App8A-122
App8A-125
104. Littleton Manufacturing uses a standard cost system in which manufacturing overhead is
applied to units of product on the basis of standard machine-hours. At standard, each unit of
product requires one machine-hour to complete. The standard variable overhead is $1.80 per
machine-hour and $432,000 per year. The denominator level of activity is 120,000 machine-hours,
or 120,000 units. Actual data for the year were as follows:
Actual variable overhead cost $178,500
Actual fixed manufacturing overhead cost $248,000
Actual machine-hours 105,000
Units produced 100,000
Required:
a. What are the predetermined variable and fixed manufacturing overhead rates?
b. Compute the variable overhead rate and efficiency variances.
c. Compute the fixed manufacturing overhead budget and volume variances.
App8A-128
105. You have just been hired as the new executive assistant to the manager of the Eastern
Division of Global Manufacturing. You have been given the following incomplete records
concerning manufacturing overhead for last year:
Variable overhead rate $3.50 per DLH
Budgeted fixed manufacturing overhead $70,000
Total actual overhead cost $259,400
Fixed overhead budget variance $10,000 Unfavorable
Variable overhead efficiency variance $14,000 Unfavorable
Actual direct labor-hours worked 52,000 DLHs
Denominator activity level 50,000 DLHs
Standard hours per unit 2 DLHs
The company uses a standard cost system in which manufacturing overhead costs are applied to
products on the basis of standard direct labor-hours (DLHs).
Required:
a. Compute the variable overhead rate variance and indicate whether it was favorable or
unfavorable.
b. Compute the fixed overhead volume variance and indicate whether it was favorable or
unfavorable.
106. Aslett Corporation’s manufacturing overhead includes $3.80 per machine–hour for
supplies; $8.80 per machine-hour for indirect labor; $214,132 per period for salaries; and
$546,720 per period for depreciation.
Required:
Determine the predetermined overhead rate if the denominator level of activity is 6,800 machine–
hours. Show your work!
App8A-131
107. Pierce Corporation uses a standard cost system in which it applies manufacturing
overhead to its product on the basis of standard direct labor-hours (DLHs). Below is the standard
cost card for the product:
Direct materials, 4.5 feet × $3.80 per foot $17.10
Direct labor, 3.0 DLHs × $9.50 per DLH 28.50
Variable overhead, 3.0 DLHs × $2.00 per DLH 6.00
Fixed overhead, 3.0 DLHs × $8.00 per DLH 24.00
$75.60
Last year, the company produced 6,000 units of product using 17,000 direct labor-hours. The
actual total fixed manufacturing overhead cost for the year was $140,000 and the volume
variance was $12,000, favorable.
Required:
a. Determine the budgeted amount of total fixed manufacturing overhead cost.
b. Determine the denominator activity figure that the company used in computing predetermined
overhead rates.
108. Faessler Corporation applies overhead to products based on machine-hours. The
denominator level of activity is 6,500 machine-hours. The budgeted fixed manufacturing overhead
costs are $242,450. In July, the actual fixed manufacturing overhead costs were $242,490 and the
standard machine-hours allowed for the actual output were 7,000 machine-hours.
Required:
a. Compute the budget variance for July. Show your work!
b. Compute the volume variance for July. Show your work!
App8A-134
109. Dixie Corporation has provided the following data for June.
Denominator level of activity 2,000 machine-hours
Budgeted fixed manufacturing overhead costs $39,200
Fixed component of the predetermined overhead rate $19.60 per machine-hour
Actual level of activity 2,300 machine-hours
Standard machine-hours allowed for the actual output 2,200 machine-hours
Actual fixed manufacturing overhead costs $40,550
Required:
a. Compute the budget variance for June. Show your work!
b. Compute the volume variance for June. Show your work!
App8A-136
110. Stenquist Corporation has provided the following data for January.
Denominator level of activity 7,900 machine-hours
Budgeted fixed manufacturing overhead costs $95,590
Standard machine-hours allowed for the actual output 8,300 machine-hours
Actual fixed manufacturing overhead costs $98,710
Required:
a. Compute the budget variance for January. Show your work!
b. Compute the volume variance for January. Show your work!
111. Kingdon Corporation’s manufacturing overhead includes $7.10 per machine–hour for
variable manufacturing overhead and $207,000 per period for fixed manufacturing overhead.
Required:
Determine the predetermined overhead rate for the denominator level of activity of 4,600
machine-hours.