Variable manufacturing overhead 17800 u 16000 u never

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Supply Chain Management: A Logistics Perspective
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Chapter 6 / Exercise 1
Supply Chain Management: A Logistics Perspective
Coyle/Langley
Expert Verified
Variable ManufacturingOverhead$17,800 U$16,000 UNever a Variance8-7
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Supply Chain Management: A Logistics Perspective
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Chapter 6 / Exercise 1
Supply Chain Management: A Logistics Perspective
Coyle/Langley
Expert Verified
Fixed ManufacturingOverhead$13,000 UNever a Variance$36,000 FSolution Exhibit 8-27 has details of these variances.A detailed comparison of actual and flexible budgeted amounts is:ActualFlexible BudgetOutput units (auto parts)4,4004,400Allocation base (machine-hours)28,40026,400aAllocation base per output unit6.45b6.00Variable MOH$245,000$211,200cVariable MOH per hour$8.63d$8.00Fixed MOH$373,000$360,000eFixed MOH per hour$13.13fa 4,400 units × 6.00 machine-hours/unit = 26,400 machine-hoursb 28,400 ÷ 4,400 = 6.45 machine-hours per unitc4,400 units × 6.00 machine-hours per unit × $8.00 per machine-hour = $211,200d$245,000 ÷ 28,400 = $8.63e4,000 units × 6.00 machine-hours per unit × $15 per machine-hour = $360,000f$373,000 ÷ 28,400 = $13.132.Variable Manufacturing Overhead Control245,000Accounts Payable Control and other accounts245,000Work-in-Process Control211,200Variable Manufacturing Overhead Allocated211,200Variable Manufacturing Overhead Allocated211,200Variable Manufacturing Overhead Spending Variance17,800Variable Manufacturing Overhead Efficiency Variance16,000Variable Manufacturing Overhead Control245,000Fixed Manufacturing Overhead Control373,000Wages Payable Control, Accumulated Depreciation Control, etc. 373,000Work-in-Process Control396,000Fixed Manufacturing Overhead Allocated396,000Fixed Manufacturing Overhead Allocated396,000Fixed Manufacturing Overhead Spending Variance13,000Fixed Manufacturing Overhead Production-Volume Variance36,000Fixed Manufacturing Overhead Control373,0008-7
3.Individual fixed manufacturing overhead items are not usually affected very much byday-to-day control. Instead, they are controlled periodically through planning decisions andbudgeting procedures that may sometimes have horizons covering six months or a year (forexample, management salaries) and sometimes covering many years (for example, long-termleases and depreciation on plant and equipment).4. The fixed overhead spending variance is caused by the actual realization of fixed costsdiffering from the budgeted amounts. Some fixed costs are known because they arecontractually specified, such as rent or insurance, although if the rental or insurance contractexpires during the year, the fixed amount can change. Other fixed costs are estimated, such asthe cost of managerial salaries which may depend on bonuses and other payments not known atthe beginning of the period. In this example, the spending variance is unfavorable, so actualFOH is greater than the budgeted amount of FOH. The fixed overhead production volume variance is caused by production being over orunder expected capacity. You may be under capacity when demand drops from expected levels,or if there are problems with production. Over capacity is usually driven by favorable demandshocks or a desire to increase inventories. The fact that there is a favorable volume varianceindicates that production exceeded the expected level of output (4,400 units actual relative to adenominator level of 4,000 output units).

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