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246. The following standard overhead costs were developed for one of the products of Mildey Company:
Variable overhead: 5 hours × $4.00 per hour 20.00
Fixed overhead: 5 hours × $15.00 per hour 75.00
Total standard overhead cost per unit $95.00
The following information is available regarding the company’s operations for the period:
Units produced 20,000
Direct labor 115,000 hours
Overhead incurred:
Variable $437,500
Fixed $1,320,000
Budgeted fixed overhead for the period is $1,350,000, and the standard fixed overhead rate is based on expected capacity
of 90,000 direct labor hours.
Required:
A. Calculate the variable overhead spending variance and indicate whether it is favorable or unfavorable.
B. Calculate the variable overhead efficiency variance and indicate whether it is favorable or unfavorable.
C. Calculate the fixed overhead spending variance and indicate whether it is favorable or unfavorable.
D. Calculate the fixed overhead volume variance and indicate whether it is favorable or unfavorable.
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247. At the beginning of the year, Folsom Company had the following standard cost sheet for one of its food products:
Direct materials (10 lb @ 3.20) $32.00
Direct labor (4 hr @ $9.00) 36.00
Fixed overhead (4 hr @ $4.00) 16.00
Variable overhead (4 hr @ $0.75) 3.00
Standard cost per unit $87.00
Folsom computes its overhead rates using practical capacity, which is 72,000 units. The actual results for the year are:
Units produced 70,000
Direct labor hours 290,000
Actual wage per hour $9.05
Fixed overhead $1,160,000
Variable overhead $218,000
A. Compute the fixed overhead spending and volume variances.
B. Compute the variable overhead spending and efficiency variances.
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248. Mills Company uses standard costing for direct materials and direct labor. Management would like to use standard
costing for variable and fixed overhead.
The following monthly cost functions were developed for overhead items:
Overhead Item Cost Function
Indirect materials $1.00 per DLH
Indirect labor $1.25 per DLH
Utilities $0.50 per DLH
Insurance $10,000
Depreciation $40,000
The cost functions are considered reliable within a relevant range of 20,000 to 40,000 direct labor hours. The company
expects to operate at 25,000 direct labor hours per month.
Information for the month of June is as follows:
Actual overhead costs incurred:
Indirect materials $ 20,000
Indirect labor 30,000
Utilities 12,000
Insurance 11,000
Depreciation 40,000
Total $113,000
Actual direct labor hours worked: 24,000
Standard direct labor hours allowed for production achieved: 27,000
Required:
A. Calculate the following overhead rates based upon expected capacity:
1. Variable overhead
2. Fixed overhead rate
3. Total overhead rate
B. Calculate the following variances:
1. Variable overhead spending variance
2. Variable overhead efficiency variance
3. Fixed overhead spending variance
4. Fixed overhead volume variance
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249. The following costs were developed for one of the products of Larry Corporation:
Variable overhead: 8 hours × $8.00 per hour $64.00
Fixed overhead: 8 hours × $12 per hour $96.00
The following information is available regarding the company’s operations for the period:
Units produced: 11,000
Direct labor: 84,000 hours costing $840,000
Overhead incurred:
Variable $756,000
Fixed $1,000,000
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Budgeted fixed overhead for the period is $960,000, and the standard fixed overhead rate is based on expected capacity of
80,000 direct labor hours.
Required:
A. Calculate the variable overhead spending variance.
B. Calculate the variable overhead efficiency variance.
C. Calculate the fixed overhead spending variance.
D. Calculate the fixed overhead volume variance.
250. Gallant Company uses standard costing. Overhead is applied to products on the basis of standard direct labor hours
for actual production. Data for Gallant follows:
Standard direct labor hours allowed for actual output 110,000
Actual direct labor hours 115,000
Direct labor hours budgeted in the master budget 120,000
Budgeted total fixed overhead cost $210,000
Actual fixed overhead cost $208,000
A. Calculate the fixed overhead rate.
B. Calculate the total fixed overhead applied to production.
C. Calculate the fixed overhead spending variance.
D. Calculate the fixed overhead volume variance.
E. Calculate the total fixed overhead variance.
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251. Bushman Company is planning to produce 3,200,000 carburetors for the coming year. Each carburetor requires 0.375
standard hours of labor for completion. The company uses direct labor hours to assign overhead to products. The total
fixed overhead budgeted for the coming year is $1,980,000. Total budgeted overhead is $4,050,000. Predetermined
overhead rates are calculated using expected production, measured in direct labor hours. Actual results for the year follow:
Actual production (units) 3,540,000
Actual direct labor hours 1,190,000
Actual fixed overhead $1,920,000
Actual variable overhead $2,150,000
Required:
A. Compute the applied fixed overhead.
B. Compute the fixed overhead spending and volume variances.
C. Compute the applied variable overhead.
D. Compute the variable overhead spending and efficiency variances. Carry per hour computations out to 3 decimals.
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252. Vallo Pharmacy operates a home delivery service with more than 2,000 housebound clients. Vallo has a fleet of
vehicles and has invested in a sophisticated computerized communications system to coordinate its deliveries. Vallo has
gathered the following data on last year’s operations:
Deliveries made: 21,000
Direct labor: 15,000 delivery hours at $8.00
Actual variable overhead: $145,000
Vallo uses a standard costing system. During the year, the following variable overhead rate was used: $8.10 per delivery
hour. The labor standard requires 0.75 hours per delivery.
Compute the variable overhead spending variance and the variable overhead efficiency variance.
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253. A company had the following information for the year:
Standard variable overhead rate (SVOR) per direct labor hour $6.75
Standard hours (SH) allowed per unit 4
Actual production 17,400
Actual variable overhead costs $478,000
Actual direct labor hours 69,800
Required:
A. Calculate the actual variable overhead rate (AVOR).
B. Calculate the applied variable overhead.
C. Calculate the total variable overhead variance.
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254. Gallant Company uses standard costing. Overhead is applied to products on the basis of standard direct labor hours
for actual production. Data for Gallant follows:
Standard direct labor hours allowed for actual output 110,000
Actual direct labor hours 115,000
Direct labor hours budgeted in the master budget 120,000
Budgeted total variable overhead cost $360,000
Actual variable overhead cost $328,000
A. Calculate the variable overhead rate.
B. Calculate the total variable overhead applied to production.
C. Calculate the variable overhead spending variance.
D. Calculate the variable overhead efficiency variance.
E. Calculate the total variable overhead variance.
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