Using the separate overhead variance calculations for variable and fixed costs

Using the separate overhead variance calculations for variable and fixed costs

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Using the separate overhead variance calculations for variable and fixed costs, the total overhead  variance is the same $485 unfavorable. The total variable overhead cost variance is $542  unfavorable, indicating actual variable costs were higher than standard variable costs and, therefore,  the overhead is underapplied. The total fixed overhead variance is $57 favorable, indicating overhead  is overapplied, because the actual fixed costs are less than the standard fixed costs. The $650 unfavorable variable cost spending variance is calculated by subtracting the $4,680 flexible  budget for variable overhead (actual direct labor hours times variable overhead per direct labor hour,  or 6,500  ×  $0.72) from the actual variable overhead of $5,330. It is unfavorable because more was  spent on variable overhead costs per direct labor hour than the $0.72 that was budgeted. Knowing 
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: that total variable costs are $5,330 and that 6,500 direct labor hours were incurred, the actual variable overhead costs per direct labor hour rate was $0.82. The $108 favorable efficiency variance is determined by subtracting $4,788 standard overhead (13,300 units by the variable overhead per unit predetermined rate of $0.36) from the flexible budget variable overhead cost of $4,680. It occurred because it took only 6,500 direct labor hours instead of 6,650 (13,300 units × .5 hours per unit) direct labor hours to produce the 13,300 units. The total variable cost variance of $542 is calculated by adding the $650 unfavorable spending variance and the $108 favorable efficiency variance....
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern