Quality Fender uses a standard cost system and provide the following​ information: 1​(Click the icon to view the​ information.) Quality Fender allocates manufacturing overhead to production based on...




Quality
Fender uses a standard cost system and provide the following​ information:



1​(Click

the icon to view the​ information.)


Quality

Fender allocates manufacturing overhead to production based on standard direct labor hours.
Quality

Fender reported the following actual results for
2024​:

actual number of fenders​ produced,
20,000​;

actual variable​ overhead,
$4,610​;

actual fixed​ overhead,
$24,000​;

actual direct labor​ hours,
360.




Read the
requirements2.






Requirement 1. Compute the overhead variances for the​ year: variable overhead cost​ variance, variable overhead efficiency​ variance, fixed overhead cost​ variance, and fixed overhead volume variance.


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).​(You may need to simply the formula based on the data provided. Abbreviations​ used: AC​ = actual​ cost; AQ​ = actual​ quantity; FOH​ = fixed​ overhead; SC​ = standard​ cost; SQ​ = standard​ quantity; VOH​ = variable​ overhead.)



































Formula




Variance


VOH cost variance


=



(1) (AC - SC) × AQ



=







(2) U



VOH efficiency variance


=



(3)



=







(4) F





Now compute the fixed overhead cost and volume variances. Select the required​ formulas, compute the fixed overhead cost and volume​ 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.)



































Formula




Variance


FOH cost variance


=



(5)



=







(6)



FOH volume variance


=



(7)



=







(8)





Requirement 2. Explain why the variances are favorable or unfavorable.


The variable overhead cost variance is

(9)




because management spent

(10)




than budgeted for the actual production.

The variable overhead efficiency variance is

(11)




because management used

(12)




direct labor hours than standard and variable overhead is applied​ (incurred) based on direct labor.

The fixed overhead cost variance is

(13)




because management spent

(14)




than the amount budgeted for fixed overhead.

The fixed overhead volume variance is

(15)




because management allocated

(16)




fixed overhead to jobs than was budgeted.



1: Data Table




























Static budget variable overhead


$4,608


Static budget fixed overhead


$23,040


Static budget direct labor hours


576 hours


Static budget number of units


24,000 units


Standard direct labor hours


0.024 hours per fender







2: Requirements















1.


Compute the overhead variances for the​ year: variable overhead cost​ variance, variable overhead efficiency​ variance, fixed overhead cost​ variance, and fixed overhead volume variance.


2.


Explain why the variances are favorable or unfavorable.









(1)





(AC - SC) × AQ



(AC - SC) × SQ



(AQ - SQ) × AC





(AQ - SQ) × SC



Actual FOH - Allocated FOH



Actual FOH - Budgeted FOH



Bugeted FOH - Allocated FOH







(2)





F



U







(3)





(AC - SC) × AQ



(AC - SC) × SQ



(AQ - SQ) × AC





(AQ - SQ) × SC



Actual FOH - Allocated FOH



Actual FOH - Budgeted FOH



Bugeted FOH - Allocated FOH







(4)





F



U







(5)





(AC - SC) × AQ



(AC - SC) × SQ



(AQ - SQ) × AC





(AQ - SQ) × SC



Actual FOH - Allocated FOH



Actual FOH - Budgeted FOH



Bugeted FOH - Allocated FOH







(6)





F



U







(7)





(AC - SC) × AQ



(AC - SC) × SQ



(AQ - SQ) × AC





(AQ - SQ) × SC



Actual FOH - Allocated FOH



Actual FOH - Budgeted FOH



Bugeted FOH - Allocated FOH







(8)





F



U







(9)



unfavorable



favorable







(10)



more



less







(11)



favorable



unfavorable







(12)



fewer



more







(13)



unfavorable



favorable







(14)



more



less







(15)



unfavorable



favorable







(16)



less



more





Jun 10, 2022
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