Please note there are two requirements and I have provided a sample of what the final answer should look like. The answe
Posted: Fri Jul 01, 2022 8:26 am
Please note there are two requirements and I have provided asample of what the final answer should look like.
The answer should have both requirements 1 and 2 and look likethis:
Requirements 1. 2. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances. Explain why the variances are favorable or unfavorable. I
Deluxe, Inc. uses a standard cost system and provides the following information.
Data table Static budget variable overhead Static budget fixed overhead Static budget direct labor hours Static budget number of units Standard direct labor hours $2,100 $2,800 1,400 hours 700 units 2 hours per unit
Deluxe allocates manufacturing overhead to production based on standard direct labor hours. Deluxe reported the following actual results for 2018: actual number of units produced, 1,000; actual variable overhead, $3,800; actual fixed overhead, $3,200; actual direct labor hours, 1,200.
Requirement 1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances. Begin with the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity; VOH = variable overhead.) Variance VOH cost variance VOH efficiency variance 11 = Formula II II
Actual quantity at Actual cost [Actual VOH] Standard cost (SC) Actual quantity (AQ) Standard quantity (SQ) Variable Overhead $ $ Formula = 5,000 Compute the variable overhead cost and efficiency variances using the amounts we have previously determined, and identify whether each variance is favorable (F) or unfavorable (U). The variance is favorable when actual amounts are less than standards and unfavorable when actual amounts exceed I standards. ▼ 1.50 per hr. ▼ 1,800 hours 2,000 hours X = Actual VOH - (SC × AQ) (AQ - SQ) × SC = $ 5,000 - ( = ( 1,800 $ 1.50 2,000 X 1,800 ) = $ ) x $ 1.50 $ Variance 2,300 U 300 F VOH cost variance VOH efficiency variance Now let's take a look at the fixed overhead cost and volume variances. Great will use a slightly different approach to analyze the fixed overhead variances. Remember that fixed costs are not expected to change in total within the relevant range, but they do change per unit when there is a change in volume. To analyze fixed overhead costs, we will need three amounts:
= Formula Actual VOH - (SC × AQ) (AQ - SQ) × SC = • Actual fixed overhead costs incurred • Budgeted fixed overhead costs • Allocated fixed overhead costs VOH cost variance VOH efficiency variance Now let's take a look at the fixed overhead cost and volume variances. Great will use a slightly different approach to analyze the fixed overhead variances. Remember that fixed costs are not expected to change in total within the relevant range, but they do change per unit when there is a change in volume. To analyze fixed overhead costs, we will need three amounts: = $5,000 - ( 1,800 = ( $ 1.50 2,000 X 1,800 ) x $ 1.50 ) = $ = $ Variance 2,300 U 300 F ▼ Begin by identifying the actual fixed overhead (FOH) costs incurred, the budgeted FOH costs, and the allocated FOH costs. Note that we are given the actual and budgeted FOH in the information given. We must calculate allocated fixed overhead costs by multiplying the standard fixed overhead allocation rate by the standard quantity of direct labor hours, which we previously determined to be 2,000 hours.
Actual fixed overhead costs incurred Budgeted fixed overhead costs Allocated fixed overhead costs FOH cost variance FOH volume variance = II = = Now compute the fixed overhead cost and volume variances using the amounts you identified above. Formula Actual FOH - Budgeted FOH Bugeted FOH - Allocated FOH Fixed Overhead 2,700 2,400 6,000 = $ 2,700 = $ 2,400 $ 2,400 $ 6,000 II = EA Variance 300 U 3,600 F
Requirement 2. Explain why the variances are favorable or unfavorable. Cost variances (VOH or FOH) are labeled as favorable if the company spent less and unfavorable if the company spent more. We compare budgeted costs to actual costs to find cost variances. Review each of the cost variances calculated in Requirement 1. Did Great actually spend more or less than budgeted? Efficiency variances (VOH) compare the actual use of resources used to allocate overhead to production (direct labor hours in our problem) to a standard amount based on actual production. Did Great use more hours to produce the 1,000 units than would be expected at two direct labor hours per unit? If so, then the efficiency variance is unfavorable. Volume variances (FOH) also compare the use of resources (direct labor in this problem) but they compare a standard amount to a budgeted amount. Review your calculation for this variance. Did Great's standard number of hours (actual number of units produced multiplied by a standard of two direct labor hours per unit) exceed the budgeted hours (static budget)? If so, then the company applied more fixed overhead than was budgeted and the volume variance is labeled as favorable.
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Deluxe, Inc. uses a standard cost system and provides the following information.
Data table Static budget variable overhead Static budget fixed overhead Static budget direct labor hours Static budget number of units Standard direct labor hours $2,100 $2,800 1,400 hours 700 units 2 hours per unit
Deluxe allocates manufacturing overhead to production based on standard direct labor hours. Deluxe reported the following actual results for 2018: actual number of units produced, 1,000; actual variable overhead, $3,800; actual fixed overhead, $3,200; actual direct labor hours, 1,200.
Requirement 1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances. Begin with the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity; VOH = variable overhead.) Variance VOH cost variance VOH efficiency variance 11 = Formula II II
Actual quantity at Actual cost [Actual VOH] Standard cost (SC) Actual quantity (AQ) Standard quantity (SQ) Variable Overhead $ $ Formula = 5,000 Compute the variable overhead cost and efficiency variances using the amounts we have previously determined, and identify whether each variance is favorable (F) or unfavorable (U). The variance is favorable when actual amounts are less than standards and unfavorable when actual amounts exceed I standards. ▼ 1.50 per hr. ▼ 1,800 hours 2,000 hours X = Actual VOH - (SC × AQ) (AQ - SQ) × SC = $ 5,000 - ( = ( 1,800 $ 1.50 2,000 X 1,800 ) = $ ) x $ 1.50 $ Variance 2,300 U 300 F VOH cost variance VOH efficiency variance Now let's take a look at the fixed overhead cost and volume variances. Great will use a slightly different approach to analyze the fixed overhead variances. Remember that fixed costs are not expected to change in total within the relevant range, but they do change per unit when there is a change in volume. To analyze fixed overhead costs, we will need three amounts:
= Formula Actual VOH - (SC × AQ) (AQ - SQ) × SC = • Actual fixed overhead costs incurred • Budgeted fixed overhead costs • Allocated fixed overhead costs VOH cost variance VOH efficiency variance Now let's take a look at the fixed overhead cost and volume variances. Great will use a slightly different approach to analyze the fixed overhead variances. Remember that fixed costs are not expected to change in total within the relevant range, but they do change per unit when there is a change in volume. To analyze fixed overhead costs, we will need three amounts: = $5,000 - ( 1,800 = ( $ 1.50 2,000 X 1,800 ) x $ 1.50 ) = $ = $ Variance 2,300 U 300 F ▼ Begin by identifying the actual fixed overhead (FOH) costs incurred, the budgeted FOH costs, and the allocated FOH costs. Note that we are given the actual and budgeted FOH in the information given. We must calculate allocated fixed overhead costs by multiplying the standard fixed overhead allocation rate by the standard quantity of direct labor hours, which we previously determined to be 2,000 hours.
Actual fixed overhead costs incurred Budgeted fixed overhead costs Allocated fixed overhead costs FOH cost variance FOH volume variance = II = = Now compute the fixed overhead cost and volume variances using the amounts you identified above. Formula Actual FOH - Budgeted FOH Bugeted FOH - Allocated FOH Fixed Overhead 2,700 2,400 6,000 = $ 2,700 = $ 2,400 $ 2,400 $ 6,000 II = EA Variance 300 U 3,600 F
Requirement 2. Explain why the variances are favorable or unfavorable. Cost variances (VOH or FOH) are labeled as favorable if the company spent less and unfavorable if the company spent more. We compare budgeted costs to actual costs to find cost variances. Review each of the cost variances calculated in Requirement 1. Did Great actually spend more or less than budgeted? Efficiency variances (VOH) compare the actual use of resources used to allocate overhead to production (direct labor hours in our problem) to a standard amount based on actual production. Did Great use more hours to produce the 1,000 units than would be expected at two direct labor hours per unit? If so, then the efficiency variance is unfavorable. Volume variances (FOH) also compare the use of resources (direct labor in this problem) but they compare a standard amount to a budgeted amount. Review your calculation for this variance. Did Great's standard number of hours (actual number of units produced multiplied by a standard of two direct labor hours per unit) exceed the budgeted hours (static budget)? If so, then the company applied more fixed overhead than was budgeted and the volume variance is labeled as favorable.