Efficiency variance of 56000f it is favorable because

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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. 8-2
8-19 (30 min.) Fixed manufacturing overhead variance analysis (continuation of 8-18). 1. Budgeted standard direct manufacturing labor used = 0.02 per baguette Budgeted output = 3,200,000 baguettes Budgeted standard direct manufacturing labor-hours = 3,200,000 × 0.02 = 64,000 hours Budgeted fixed manufacturing overhead costs = 64,000 × $4.00 per hour = $256,000 Actual output = 2,800,000 baguettes Allocated fixed manufacturing overhead = 2,800,000 × 0.02 × $4 = $224,000 Fixed Manufacturing Overhead Variance Analysis for French Bread Company for 2009 Actual Costs Incurred (1) Same Budgeted Lump Sum (as in Static Budget) Regardless of Output Level (2) Flexible Budget: Same Budgeted Lump Sum (as in Static Budget) Regardless of Output Level (3) Allocated: Budgeted Input Qty. Allowed for Actual Output × Budgeted Rate (4) $272,000 $256,000 $256,000 (2,800,000 × 0.02 × $4) $224,000 2. The fixed manufacturing overhead is underallocated by $48,000. 3. The production-volume variance of $32,000U captures the difference between the budgeted 3,200,0000 baguettes and the lower actual 2,800,000 baguettes produced—the fixed cost capacity not used. The spending variance of $16,000 unfavorable means that the actual aggregate of fixed costs ($272,000) exceeds the budget amount ($256,000). For example, monthly leasing rates for baguette-making machines may have increased above those in the budget for 2009. 8-2
8-20 (30–40 min.) Manufacturing overhead, variance analysis. 1. The summary information is: The Solutions Corporation (June 2009) Actual Flexible Budget Static Budget Outputs units (number of assembled units) 216 216 200 Hours of assembly time 411 432 c 400 a Assembly hours per unit 1.90 b 2.00 2.00 Variable mfg. overhead cost per hour of assembly time $ 30.20 d $ 30.00 $ 30.00 Variable mfg. overhead costs $12,420 $12,960 e $12,000 f Fixed mfg. overhead costs $20,560 $19,200 $19,200 Fixed mfg. overhead costs per hour of assembly time $ 50.02 g $ 48.00 h a 200 units 2 assembly hours per unit = 400 hours b 411 hours 216 units = 1.90 assembly hours per unit c 216 units 2 assembly hours per unit = 432 hours d $12,420 411 assembly hours = $30.22 per assembly hour e 432 assembly hours $30 per assembly hour = $12,960 f 400 assembly hours $30 per assembly hour = $12,000 g $20,560 411 assembly hours = $50 per assembly hour h $19,200 400 assembly hours = $48 per assembly hour 8-2
Flexible Budget: Actual Costs Actual Input Qty. Budgeted Input Qty. Allowed Budgeted Budgeted Input Qty. Allowed Budgeted Incu rred Budgeted Rate for Actual Output Rate Variable 411 $30.00 432 $30.00 432 $30.00 Manufact uring assy. hrs.

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