Groschl Company has had great difficulty in controlling manufacturing overhead costs. At a recent convention, the president heard about a control device for overhead costs known as a flexible budget , and he has hired you to implement this budgeting program in Groschl Company. After some effort, you have developed the following cost formulas for the company€™s Machining Department. These costs are based on a normal operating range of 10,000 to 20,000 machine-hours per month:

During March, the first month after your preparation of the above data, the Machining Department worked 18,000 machine-hours and produced 9,000 units of product. The actual manufacturing overhead costs for March were as follows:
Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,000
Lubricants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,500
Machine setup. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800
Indirect labour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,500
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,000
Total manufacturing overhead cost. . . . . . . . . . . . . . . . . . . . . .$205,800
Fixed costs had no budget variances. The department had originally been budgeted to work 20,000 machine-hours during March.
Required:
1. Prepare an overhead performance report for the Machining Department for the month of March. Include both variable and fixed costs in the report (in separate sections). Show only a spending variance on the report.
2. What additional information would you need to compute an overhead efficiency variance for the department?

Transcribed Image Text:

Overhead Cost Cost Formula Utilities . Lubricants.. Machine setup. Indirect labour.. $0.70 per S100 per machine-hour plus $8,000 per month $0.20 per machine-hour $060 per machine-haur plus $120,000 per month $32,000 per month Depreciation...