Ch08 - 8-18 1 2 1 2 3 4 5 6 a(30 min Variable manufacturing overhead variance analysis Denominator level =(3,200,000 × 0.02 hours = 64,000 hours

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Unformatted text preview: 8-18 1. 2. 1. 2. 3. 4. 5. 6. a (30 min.) Variable manufacturing overhead variance analysis. Denominator level = (3,200,000 × 0.02 hours) = 64,000 hours Actual Results 2,800,000 50,400 0.018 \$680,400 \$13.50 \$0.243 Flexible Budget Amounts 2,800,000 56,000a 0.020 \$560,000 \$10 \$0.200 Output units (baguettes) Direct manufacturing labor-hours Labor-hours per output unit (2 ÷ 1) Variable manuf. overhead (MOH) costs Variable MOH per labor-hour (4 ÷ 2) Variable MOH per output unit (4 ÷ 1) × 0.020= 56,000 hours 2,800,000 Variable Manufacturing Overhead Variance Analysis for French Bread Company for 2009 Flexible Budget: Allocated: Actual Costs Budgeted Input Qty. Budgeted Input Qty. Incurred Allowed for Allowed for Actual Input Qty. Actual Input Qty. Actual Output Actual Output × Actual Rate × Budgeted Rate × Budgeted Rate × Budgeted Rate (1) (2) (3) (4) (50,400 × \$13.50) (50,400 × \$10) (56,000 × \$10) (56,000 × \$10) \$680,400 \$504,000 \$560,000 \$560,000 \$176,400 U Spending variance \$56,000 F Efficiency variance Never a variance Never a variance \$120,400 U Flexible-budget variance 3. Spending variance of \$176,400U. It is unfavorable because variable manufacturing overhead was 35% higher than planned. A possible explanation could be an increase in energy rates relative to the rate per standard labor-hour assumed in the flexible budget. Efficiency variance of \$56,000F. It is favorable because the actual number of direct manufacturing labor-hours required was lower than the number of hours in the flexible budget. Labor was more efficient in producing the baguettes than management had anticipated in the budget. This could occur because of improved morale in the company, which could result from an increase in wages or an improvement in the compensation scheme. Flexible-budget variance of \$120,400U. It is unfavorable because the favorable efficiency variance was not large enough to compensate for the large unfavorable spending variance. ...
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This note was uploaded on 02/23/2010 for the course ACCT 42312 taught by Professor Huh during the Fall '09 term at CSU San Bernardino.

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