Fun Unlimited Corp. produces a toy called the Challenge.

Overhead is applied to products on the

basis of direct labour-hours. The company recently implemented a standard costing system to
help control costs and has established the following standards for the Challenge toys:

Direct materials: 6 microns per toy at $0.50 per micron

Direct labour: 1.3 hours per toy at $15 per hour
Variable manufacturing overhead: 1.3 hours per toy at $4 per hour
Fixed manufacturing overhead: 1.3 hours per toy at $6 per hour

During July, the company produced 3,000 Challenge toys. The fixed overhead expense budget for
July was $24,180, with 4,030 direct labour-hours as the denominator level of activity. Production
data for the month on the toys follow:

Direct materials: 25,000 microns were purchased at a cost of $0.48 per micron; 5,000 of these
microns were still in inventory at the end of the month.
Direct labour: 4,000 direct labour-hours were worked, at a cost of $64,000.
Variable overhead: Actual cost in July was $17,000.
Fixed overhead: Actual cost in July was $25,000.

Required:
1. Compute the materials, labour, variable manufacturing overhead, and fixed manufacturing overh
2. Calculate total overapplied or underapplied overhead for July.

Part 1
Material Variance
Material Price Variance

Materials Quantity Variance

Labour Variance
Labour Rate Variance

Labour Efficiency Variance

Variable Overhead Variance
Variable Overhead Spending Variance

Variable Overhead Efficiency Variance

Fixed Overhead Variance

Part 2 Calculate total overapplied or underapplied overhead for July.

Actual overhead costs incurred:

Overhead costs applied:

 products on the
ng system to
toys:

pense budget for

vity. Production

5,000 of these

ixed manufacturing overhead variances.

Cost
DM $0.50
DL $15
VMOH $4
FMOH $6

Prod 3,000
FMOH $24,180
DLH 4,030

Purch 25,000
Cost $0.48
End Inv 5,000
DLH 4,000
DL Cost $64,000
VMOH $17,000
FMOH $25,000
 Cost
DM $0.50
DL $15
VMOH $4
FMOH $6

Prod 3,000
FMOH $24,180
DLH 4,030

Purch 25,000
Cost $0.48
End Inv 5,000
DLH 4,000
DL Cost $64,000
VMOH $17,000
FMOH $25,000
Part 1
Material Variance
Material Price Variance Sales
Variable
COGS
Sell Exp
Tot Var
Materials Quantity Variance CM
Fixed
MOH
S&A
Tot Fix
Labour Variance OI
Labour Rate Variance

DM
DL
VOH
Labour Efficiency Variance SP

Actual
Purchase
Produce
Variable Overhead Variance DLH
Variable Overhead Spending Variance
Variable Overhead Efficiency Variance
Sales
Variable
COGS
Sell Exp
Part 2 Tot Var
CM
Fixed
MOH
S&A
Tot Fix
OI

DM
DL
VOH
SP

Actual
Purchase
Produce
DLH

Part 3
Budget Actual Units
$125,000 $125,000 2,500

$40,000 $45,455
$10,000 $10,000
$50,000 $55,455
$75,000 $69,545

$30,000 $29,500
$37,500 $37,500
$67,500 $67,000
$7,500 $2,545

Qty/Hrs Price/Rt Standard

2 $1.25 $2.50
0.54 $10.00 $5.40
0.27 $1.00 $0.27
$8.17

6,300 $1.50
4,900
1,800 $9.50
900 $1,080
Budget Actual Units
$125,000 $125,000 2,500

$40,000 $45,455
$10,000 $10,000
$50,000 $55,455
$75,000 $69,545

$30,000 $29,500
$37,500 $37,500
$67,500 $67,000
$7,500 $2,545

Qty/Hrs Price/Rt Standard

2 $1.25 $2.50
0.54 $10.00 $5.40
0.27 $1.00 $0.27
$8.17

6,300 $1.50
4,900
1,800 $9.50
900 $1,080
Part 1 Direct materials price and quantity variances:

Standard
DM
DL
 VOH
FOH

Produced
Purchased
DLH
Part 2 Direct labour rate and efficiency variances:
DLH
FOH Bud
Act FOH
Act VOH

Part 3A Variable manufacturing overhead spending and efficiency variances:

Standard
DM
DL
VOH
FOH

Produced
Part 3B Fixed overhead budget and volume variances: Purchased
DLH

DLH
FOH Bud
Act FOH
Act VOH

Part 4 The total of the variances would be:

Per Unit Driver #/Unit
$14 4 $3.50
$18 1.5 $12
 $3 1.5 $2
$9 1.5 $6
$44

20,000
78,000 $3.75
32,500 $11.80

25,000
$150,000
$148,000
$68,250

Per Unit Driver #/Unit

$14 4 $3.50
$18 1.5 $12
$3 1.5 $2
$9 1.5 $6
$44

20,000
78,000 $3.75
32,500 $11.80

25,000
$150,000
$148,000
$68,250
Part 1 Mach Hr 18,000

VMOH 31,500
FMOH 72,000
TMOH 103,500

A Mach 15,000
S Mach 16,000
A VMOH 26,500
A FMOH 70,000
Part 2
MOH
Actual 96,500
Applied 92,000
Part 3 Under 4,500
VARIABLE MOH
Variable Overhead Spending Variance

Variable Overhead Efficiency Variance

Mach Hr 18,000
FIXED MOH
Budget variance VMOH 31,500
FMOH 72,000
TMOH 103,500

A Mach 15,000
Volume variance S Mach 16,000
A VMOH 26,500
A FMOH 70,000

MOH
Actual 96,500
Applied 92,000
Under 4,500

Part 4