Dvent budgets 18,000 machine hours for the production of computer chips in August 2013. The budgeted variable
Question:
Dvent budgets 18,000 machine hours for the production of computer chips in August 2013. The budgeted variable overhead rate is $6 per machine-hour. At the end of August there is a $375 favourable rate variance for variable over head and a $1,575 unfavourable rate variance for fixed overhead. For the computer chips produced, 14,850 machine-hours are budgeted and 15,000 machine-hours are actually used. Total actual overhead costs are $120,000.
REQUIRED
1. Compute efficiency and flexible-budget variances for Dvent's variable overhead in August 2013. Will variable overhead be overallocated or underallocated? By how much?
2. Compute production-volume and flexible-budget variances for Dvent's fixed overhead in August 2013. Will fixed overhead be overallocated or underallocated? By how much?
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ