Caroline, Inc. planned to produce 20,000 units of product and work 100,000 direct labor hours in 2013. Manufacturing overhead at the 100,000 direct labor hours level of activity was estimated to be:
Variable manufacturing overhead $ 700,000
Fixed manufacturing overhead 300,000
Total manufacturing overhead $1,000,000
At the end of 2013, 19,000 units of product were actually produced and 98,000 actual direct labor hours were worked. Total actual overhead costs for 2013 were $935,000.
(a) Compute the total overhead variance.
a(b) Compute the overhead controllable variance.
a(c) Compute the overhead volume variance.
Jackson Manufacturing planned to produce 20,000 units of product and work at the 60,000 direct labor hours level of activity for 2013. Manufacturing overhead at this level of activity and the predetermined overhead rate are as follows:
Overhead Rate per
Direct Labor Hour
Variable manufacturing overhead $300,000 $5
Fixed manufacturing overhead 120,000 2
Total manufacturing overhead $420,000 $7
At the end of 2013, 21,000 units were actually produced and 61,500 direct labor hours were actually worked. Total actual manufacturing overhead costs were $430,000.
Using a two-variance analysis of manufacturing overhead, calculate the following variances and indicate whether they are favorable or unfavorable:
(a) Overhead controllable variance.
(b) Overhead volume variance.
Adam Corporation prepared the following variance report.
Variance Report—Purchasing Department
for Week Ended January 9, 2013
Type of Quantity Actual Standard Price
Materials Purchased Price Price Variance Explanation
Brown ? lbs. $5.25 $5.00 $6,000 ? Price increase
Green 8,000 oz. ? 3.25 1,600 U Rush order
White 22,000 units $0.45 ? 660 F Bought larger quantity
Ex. 223 (Cont.)
Fill in the appropriate amounts or letters for the question marks in the report.
Pepper Industries uses a standard cost accounting system. During March, 2013, the company reported the following manufacturing variances:
Materials price variance $1,600 F
Materials quantity variance 2,400 U
Labor price variance 600 U
Labor quantity variance 2,200 U
Overhead controllable 500 F
Overhead volume 3,000 U
In addition, 15,000 units of product were sold at $18 per unit. Each unit sold had a standard cost of $14. Selling and administrative expenses for the month were $15,000.
Prepare an income statement for management for the month ending March 31, 2013.
Howard, Inc. developed the following standards for 2013:
Standard Cost Card
Cost Elements Standard Quantity × Standard Price = Standard Cost
Direct materials 5 pounds $ 5 $25
Direct labor 1 hour $18 18
Manufacturing overhead 1 hour $10 10
The company planned to produce 120,000 units of product and work at the 120,000 direct labor level of activity in 2013. The company uses a standard cost accounting system which records standard costs in the accounts and recognizes variances in the accounts at the earliest opportunity. During 2013, 116,000 actual units of product were produced.
Prepare the journal entries to record the following transactions for Howard, Inc. during 2013.
(a) Purchased 588,000 pounds of raw materials for $4.90 per pound on account.
(b) Actual direct labor payroll amounted to $2,108,000 for 114,000 actual direct labor hours worked. Factory labor cost is to be recorded and distributed to production.
(c) Direct materials issued for production amounted to 588,000 pounds which actually cost $4.90 per pound.
(d) Actual manufacturing overhead costs incurred were $1,152,000 in 2013.
(e) Manufacturing overhead was applied when the 116,000 units were completed.
(f) Transferred the 116,000 completed units to finished goods.
Presented below is a flexible manufacturing budget for Ganem Manufacturing, which manufactures fine timepieces:
Standard direct labor hours 2,800 3,200 3,600 4,000
Indirect materials $ 5,600 $ 6,400 $ 7,200 $ 8,000
Indirect labor 3,220 3,680 4,140 4,600
Utilities 7,280 8,320 9,360 10,400
Total variable 16,100 18,400 20,700 23,000
Supervisory salaries 1,000 1,000 1,000 1,000
Rent 3,000 3,000 3,000 3,000
Total fixed 4,000 4,000 4,000 4,000
Total costs $20,100 $22,400 $24,700 $27,000
aEx. 226 (Cont.)
The company applies the overhead on the basis of direct labor hours at $7.00 per direct labor hour and the standard hours per timepiece is 1/2 hour each. The company’s actual production was 5,400 timepieces with 2,700 actual hours of direct labor. Normal capacity is 3,200 hours. Actual overhead was $20,200.
(a) Compute the controllable and volume overhead variances.
a(b) Prepare the entries for manufacturing overhead during the period and the entry to recognize the overhead variances at the end of the period.
The following information was taken from the annual manufacturing overhead cost budget of Cinnamon Manufacturing:
Variable manufacturing overhead costs $186,000
Fixed manufacturing overhead costs $124,000
Normal production level in direct labor hours 62,000
Normal production level in units 31,000
During the year, 30,000 units were produced, 64,000 hours were worked, and the actual manufacturing overhead costs were $322,000. The actual fixed manufacturing overhead costs did not deviate from the budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours.
Ex. 227 (Cont.)
(a) Compute the total, fixed, and variable predetermined manufacturing overhead rates.
a(b) Compute the total, controllable, and volume overhead variances.
Monte Industries has a standard costing system. The following data are available for July:
a. Actual manufacturing overhead cost incurred: $22,000
b. Actual machine hours worked: 1,600
c. Overhead volume variance: $3,600 Unfavorable
d. Total overhead variance: $2,000 Unfavorable
e. Overhead is assigned to production on the basis of machine hours
Determine the amount of (1) the controllable overhead variance and (2) the overhead applied.