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calgary paper company produces paper for photocopiers.

The company has developed s


capacity of 180000 direct labor hours as follows:

standard costs per unit(one box of paper):


variable overhead (2hours @$3 per hour)
fixed overhead (2 hours @$5 per hour)
total

during april, 90000 units were scheduled for production: however only 80000 units wer
actual direct labor cost incurred was $ 1567500 for 165000 actual hours of work
actual overhead totaled $ 1371500 of which $ 511500 was variable and $ 860000 was fi

required:
1. variable overhead spending variance
2. variable overhead efficiency variance
3. fixed overhead budget variance
4. fixed overhead volume variance

answer:

actual variable overhead rate (AVR) =actual variable overhead cost


actual hours
actual variable overhead
actual hours (AH) X actual rate (AVR)
165000 hours X $ 3,10 per hour
$ 511500

$ 16500 unfavorable
variable overhead spending variance

fixed overhead budget and volume variance

budgeted fixed overhead =180000 hours x $ 5 per hour

(1) (2)

actual fixed overhead budgeted fixed overhead

$ 860000 $ 900000

$ 40000 favorable
fixed overhead budget variance
e company has developed standard overhead rates based on a monthly

$ 6
$ 10
16

wever only 80000 units were actually produced. The following data relate to april.
ctual hours of work
ariable and $ 860000 was fixed

variable overhead spending and efficiency variances

= $ 511500 = $ 3,10
165000

actual hours (AH) X standard rate (SVR)


165000 hours X $ 3 per hour
$ 495000

500 unfavorable $ 15000 unfavorable


head spending variance variable overhead efficiency variance

udget and volume variances

= $ 900000

(3)

fixed overhead applied to work in process

standard allowed hours X standard fixed overhead rate


160000 hours X $ 5 per hour
$ 800000

$ 100000 favorable
fixed overhead volume variance
monthly

ta relate to april.

d efficiency variances

flexible budget: variable overhead


standard allowed hours (SH) X standard rate (SVR)
160000 hours X $ 3 per hour
$ 480000

15000 unfavorable
verhead efficiency variance no difference
variable overhead applied to work in process
standard allowed hours (SH) standard rate (SVR)
160000 hours $ 3 per hour
$ 480000

no difference