NWI is a service provider that offers computing resources measured in RAM (random-access memory)-hours to handle enterprise-wide applications. Information about variable overhead costs for March 2020 are as follows:

Required

1. For variable overhead costs in March 2020, prepare an exhibit like Exhibit 8-1 and fill in the following 

(a)  The flexible budget in column 3 (budgeted RAM-hours allowed for actual services provided), 

(b) Actual  RAM-hours used for the services provided times the budgeted variable overhead rate in column 2, 

(c)  Use the variable overhead spending variance, to calculate actual variable costs in column 1, 

(d) Calculate the variable overhead efficiency variance, and 

(e) Calculate the variable overhead flexible-budget variance. 

(f) Will variable overhead be over- or underallocated? By how much?

2. For fixed overhead costs in March 2020, prepare an exhibit like Exhibit 8-2 and complete the following:

(a) Use the fixed overhead spending variance to calculate the flexible budget in column 2, 

(b) Calculate the budgeted fixed overhead allocation rate, 

(c) Calculate the allocated amount of fixed overhead in column 3, 

(d) Calculate the production-volume variance for fixed overhead costs, and 

(e) Calculate the fixed overhead flexible budget variance. 

(f) Will fixed overhead be over- or underallocated? By how much?

Transcribed Image Text:

Budgeted variable overhead rate Flexible budget RAM-hours for actual services provided Actual RAM-hours for actual services provided Variable overhead spending variance Information about fixed overhead costs for March 2020 are as follows: $6 per RAM-hour 14,850 RAM-hours 15,000 RAM hours $500 F Actual fixed overhead costs Fixed overhead spending variance Budgeted hours (denominator level) for fixed overhead costs $30,375 $1,575 U 18,000 RAM-hours