Dvent budgets 18,000 machine-hours for the production of computer chips in August 2011. The budgeted variable overhead
Question:
Dvent budgets 18,000 machine-hours for the production of computer chips in August 2011. The budgeted variable overhead rate is $6 per machine-hour. At the end of August, there is a $375 favorable spending variance for variable overhead and a $1,575 unfavorable spending 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 2011. Will variable overhead be over- or underallocated? By how much?
2. Compute production-volume and flexible-budget variances for Dvent’s fixed overhead in August 2011. Will fixed overhead be over- or underallocated? By how much?
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 978-0132109178
14th Edition
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav