Question

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?


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  • CreatedJuly 08, 2015
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