The fixed manufacturing overhead spending variance

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The fixed manufacturing overhead spending variance and the fixed manufacturing flexible budget variance are the same––$1,516 U. Esquire spent $1,516 above the $62,400 budgeted amount for June 2017. The production-volume variance is $2,400 F. This arises because Esquire utilized its capacity more intensively than budgeted (the actual production of 1,080 suits exceeds the budgeted 1,040 suits). This results in overallocated fixed manufacturing overhead of $2,400 (4 × 40 × $15). Esquire would want to understand the reasons for a favorable production-volume
variance. Is the market growing? Is Esquire gaining market share? Will Esquire need to add capacity? 8-23 Variable manufacturing overhead variance analysis. The Sourdough Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. Variable manufacturing overhead is allocated to products on the basis of standard direct manufacturing labor-hours. Following is some budget data for the Sourdough Bread Company: Direct manufacturing labor use 0.02 hours per baguette Variable manufacturing overhead $10.00 per direct manufacturing labor-hour The Sourdough Bread Company provides the following additional data for the year ended December 31, 2017: Planned (budgeted) output 3,100,000 baguettes Actual production 2,600,000 baguettes Direct manufacturing labor 46,800 hours Actual variable manufacturing overhead $617,760 Required: 1. What is the denominator level used for allocating variable manufacturing overhead? (That is, for how many direct manufacturing labor-hours is Sourdough Bread budgeting?) 2. Prepare a variance analysis of variable manufacturing overhead. Use Exhibit 8-4 (page 304) for reference. 3. Discuss the variances you have calculated and give possible explanations for them. a
a 2,600,000 baguettes 0.02 hours per baguette = 52,000 hours Variable Manufacturing Overhead Variance Analysis for Sourdough Bread Company for 2017: Actual Costs Incurred Actual Input Qty. × Actual Rate (1) Actual Input Qty. × Budgeted Rate (2) Flexible Budget: Budgeted Input Qty. Allowed for Actual Output × Budgeted Rate (3) Allocated: Budgeted Input Qty. Allowed for Actual Output × Budgeted Rate (4) (46,800 × $13.20) $617,760 (46,800 × $10) $468,000 (52,000 × $10) $520,000 (52,000 × $10) $520,000

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