Required Calculate the following three overhead variances 1 Overhead volume

Required calculate the following three overhead

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Required: Calculate the following three overhead variances: 1. Overhead volume variance 2. Overhead efficiency variance 3. Overhead spending variance Solution
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Exercises sol (2) Budgeting (Chapters 6,12, and 13) 14.02.2020 11 Expected overhead $204,000 [$61,200 (fixed) + $142.800 (variable)] Expected volume 8,000 units or 24,000 direct labor hours (dl hrs) Overhead rate $204,000 ÷ 24,000 dl hrs = $8.50 per dl hr Variable overhead rate $142,800 ÷ 24,000 dl hrs = $5.95 per dl hr Standard volume 3 dl hrs × 8,500 units = 25,500 dl hours Flexible budget = $61,200 + $5.95 per dl hr × direct labor hours Overhead spending variance = $220,500 - ($61,200 + $5.95 × 26,200 dl hrs) $3,410 unfavorable Overhead efficiency variance = $5.95 per dl hr × (actual volume - standard volume) $5.95 × (26,200 - 25,500) $4,165 unfavorable Overhead volume variance = flexible budget at standard volume-overhead absorbed ($61,200 + $5.95 × 25,500) - $8.50 × 25,500 $3,825 favorable
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