Question Details

111.Nova Corporation produces a single product and uses a standard cost system to help control costs.

Overhead is applied to production on the basis of machine-hours. According to the company's flexible

budget, the following overhead costs should be incurred at an activity level of 18,000 machine-hours (the

denominator activity level chosen for the current year):

During the current year, the following operating results were recorded:

At the end of the year, the company's Manufacturing Overhead account showed total debits for actual

overhead costs of $145,100 and total credits for overhead actually applied of $136,000. The difference

($9,100) represents under-applied overhead, the cause of which management would like to know.

Required:

a. Compute the predetermined overhead rate that would have been used during the year, showing

separately the variable and fixed components of the rate.

b. Show how the $136,000 of "Applied Costs" was computed.

c. Analyze the $9,100 under-applied overhead figure in terms of the variable overhead spending and

efficiency variances and the fixed overhead budget and volume variances.

112.Warner Manufacturing has established the following master flexible budget for the current year:

Manufacturing overhead is applied on the basis of machine-hours. At standard, each unit of product

requires one machine-hour to complete.

Required:

a. The denominator activity level is 120,000 units. What are the predetermined variable and fixed

manufacturing overhead rates?

Actual data for the year were as follows:

b. Compute the variable overhead spending and efficiency variances and the fixed overhead budget and

volume variances for the year.

113.Wattis Manufacturing has established the following master flexible budget:

Manufacturing overhead is applied on the basis of machine-hours. At standard, each unit of product

requires one machine-hour to complete.

Required:

a. The denominator activity level is 150,000 units. What are the predetermined variable and fixed

manufacturing overhead rates?

Actual data for the year were as follows:

b. Compute the variable overhead spending and efficiency variances and the fixed overhead budget and

volume variances for the year.

114.Tracton Corporation uses a standard costing system in which manufacturing overhead costs are applied to

products on the basis of machine time.

Required:

Several numbers and labels have been omitted from the analysis of fixed overhead below. Supply the

missing numbers and labels.

Suppose that 6 minutes of machine time is standard per unit of production. How many units were actually

produced in the situation above?

Again suppose that 6 minutes of machine time is standard per unit of production. How many units of

production were assumed when the predetermined application rate for fixed overhead was established?

115.Marjorie Décor is a custom home designer for drapery. The standard material allowed for each window

is 0.5 of medium quality material, which has a standard cost of $10 per kilogram. The current operating

budget is based on production of 112,000 windows with 1.0 machine hours allowed per window. Variable

overhead is anticipated to be $1,792,000. Actual production was 116,000 using 120,000 machine hours.

Actual variable costs were $15 per machine hour.

a. Determine the spending variance

b. Determine the efficiency variance

116.Jimbob Co. uses flexible budgeting to control overhead costs. Its budgeted variable overhead costs per

machine hour are as follows:

Additionally the company estimates fixed overhead costs to be $11,000 per period. The company had

budgeted on completing 5,000 units in a period and each unit requires at standard 1 machine hour.

Actual results for one period were as follows:

Required:

a. compute the total overhead budget for 5,000 units.

b. compute the total overhead budget for actual production.

c. what was the total variable overhead variance?

d. what were the components of the total variable overhead variance?

e. what was the fixed overhead budget variance?