Question

Manitoba Paper Company packages paper for photocopiers. The company has developed standard over-head rates based on a monthly practical capacity of 90,000 direct-labor hours as follows:
Standard costs per unit (one box of paper):
Variable overhead (2 hours @ $6)......................................... $12
Fixed overhead (2 hours @ $10)........................................... 20
Total....................................................................................... $32
During June, 45,000 units were scheduled for production; however, only 40,000 units were actually produced. The following data relate to June.
1. Actual overhead incurred totaled $1,371,500, of which $511,500 was variable and $860,000 was fixed.
2. Actual direct-labor cost incurred was $1,567,500 for 82,500 actual hours of work.

Required:
Prepare two exhibits similar to Exhibits 11–6 and 11–8 in the chapter, which show the following variances. State whether each variance is favorable or unfavorable, where appropriate.
1. Variable-overhead spending variance.
2. Variable-overhead efficiency variance.
3. Fixed-overhead budget variance.
4. Fixed-overhead volume variance.
(CMA, adapted)



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  • CreatedApril 22, 2014
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