Standard overhead x actual hours budgeted hours 5 x

Info icon This preview shows pages 335–340. Sign up to view the full content.

View Full Document Right Arrow Icon
= Standard Overhead x (Actual Hours Budgeted Hours) = 5 x (800 hours 1,200 hours) = Rs 2,000 (A) = Standard Rate of Overhead = Budgeted overheads / Budgeted hours = Rs 6, 000/1, 200 = Rs 5 per hour (5) Overhead Efficiency Variance = Overheads Volume variance Overhead Capacity variance = Rs 1,000 (A) Rs 2,000 (F) = Rs 1,000 (F)
Image of page 335

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
329
Image of page 336
330 (6) Standard Hours for Actual Production Volume Variance = Standard Overheads Rate x (Standard hours for Actual Production Budgeted Hours) or 1,000 (A) = 5 (x- 1,200) or 1,000 (A) = 5 x 6,000 or -5 x = 5,000 or x = 1,000 hours Problem 5: New India Company uses a standard costing system. The company prepared its budget for 2012 at 10,00,000 machine hours for the year. Total budgeted overhead costs is Rs 12,50,00,000. The variable overhead rate is Rs 100 per machine hour (Rs 200 per unit). Actual results for 2012 are as follows: Machine hours 9,60,000 hrs. Output 4,98,000 units Variable over head ` 10,08,00,000 Fixed overhead Spending variance ` 60,00,000 A Required: (I) compute for the fixed overhead (a) Budgeted amount (b) Budgeted cost per machine hour (c) Actual cost (d) Volume variance (II) Compute variable overhead spending variance and variable overhead efficiency variance. Solution: (I) For fixed overhead: (a) Budgeted Amount: Total budgeted overhead = Rs 12,50,00,000 Less: Budgeted variable overhead (10,00,000 machine hrs x Rs 100 budgeted rate per machine hour) = 10,00,00,000 Budgeted fixed overhead 2,50,00,000 (b) Budgeted (fixed) cost per machine hour: = Rs 2,50,00,000 budgeted amount/10,00,000 budgeted machine hours = Rs 25 per machine hour (c) Actual cost (fixed): It is calculated through fixed overhead spending variance. Fixed overhead spending variance = Actual cost incurred Budgeted amount
Image of page 337

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
331 Actual cost = Budgeted amount + Unfavourable spending variance = 2,50,00,000+ 60,00,000 A = Rs 3,10,00,000 Because fixed overhead spending variance is unfavourable, the amount of actual costs is higher than the budgeted amount. (d) Production Volume Variance: Budgeted variable overhead per unit = Rs 200 Budgeted variable overhead rate = Rs 100 per machine hour Therefore budgeted machine hours allowed per unit = Rs 200/Rs 100 = 2 machine hours Formula: Budgeted fixed overhead Fixed overhead absorbed or allowed for actual output units = Rs 2,50,00,000 (Rs 25 per machine hour x 2 machine hours per unit x 4,98,000 units) = Rs 2,50,00,000 Rs 2,49,00,000 (absorbed fixed overhead) = Rs 1,00,000 Adverse Or Another formula: (St hrs for actual production Budgeted hrs) x St. fixed overhead rate per hr = (2 x 4,98,000) (10,00,000 hrs) x Rs 25 = (9,96,000 hrs 10,00,000 hrs) x Rs 25 = Rs 1,00,000 Adverse Or Another formula: (Budgeted production Actual production) x St. fixed overhead rate per unit Standard fixed overhead rate per unit = Budgeted fixed overhead/Budgeted units = Rs 2,50,00,000/5,00,000 units = Rs 50 per unit Budgeted units = 2 machine hour needed for 1 unit In 10,00,000 machine hours, units produced will be = 10,00,000/2 = 5,00,000 units Now, applying the formula (5,00,000 units 4,98,000 units) x Rs 50 = 2,000 units x Rs 50 = Rs 1,00,000 Adverse
Image of page 338
332 (II) For Variable overhead (a) Variable overhead spending variance: (Budgeted Variable overhead cost Actual Variable overhead) Budgeted variable overhead cost = Actual hrs works x St. Variable overhead rate per hour = 9,60,000 hrs x Rs 100 = Rs 9,60,00,000 Now, applying the formula (Rs 9,60,00,000 Rs 10,08,00,000) = Rs 48,00,000 Adverse Or Another formula: (St. machine hr rate
Image of page 339

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 340
This is the end of the preview. Sign up to access the rest of the 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