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148.
Algood Incorporated is trying to decide which method of analyzing its overhead variances
provides the most useful information. The following information is available from the
records for April:
Budgeted units of output
4,000 for April
Budgeted fixed overhead
$27,000/month
Budgeted variable overhead
$6/DLH
Budgeted direct labor hours
3 hours/unit
Fixed overhead incurred
$26,600
Direct labor hours used
12,000
Variable overhead incurred
$71,500
Actual units produced
4,200
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149.
Compass Company uses labor hours to allocate its variable overhead costs. Mr. Dailey, the
production manager has been told that his direct labor and variable overhead variances for
the past month were as follows:
Direct labor rate variance:
$3,000 F
Direct labor efficiency variance:
$6,000 U
Variable overhead spending variance:
$2,000 U
Variable overhead efficiency variance:
$3,000 U
150.
Harrison Company uses machine hours to allocate its fixed overhead costs. Mr. Alvarez,
the production manager has been told that his fixed overhead variances for the past
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151.
Xi Company currently uses a traditional standard costing system. During the past two
years the company has been modernizing its plant and has tried to keep the old standard
costing system in place by changing some of the features to reflect the more automated
situation. It has now come to a point, however, where the old system just isn't providing
useful information for product costing, pricing, decision making, etc. The CEO, Ms. Chang,
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