Prin Accounting Chapter 8

Data table Static budget variable overhead $2,300 $3,450 1,150 hours Static budget fixed overhead Static budget direct labor hours Static budget number of units Standard direct labor hours 575 units 2 hours per unit Requirements 1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances. 2. Explain why the variances are favorable or unfavorable. All - Star, Inc. uses a standard cost system and provides the following information. B (Click the icon to view the information.) All-Star allocates manufacturing overhead to production based on standard direct labor hours. All-Star reported the following actual results for 2024: actual number of units produced, 1,000; actual variable overhead, $5,000; actual fixed overhead, $3,500; actual direct labor hours, 1,900. Read the requirements. Requirement 1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances. Begin with the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity; VOH = variable overhead.) Formula Variance VOH cost variance = X 1,200 U (AC - SC) AQ (AQ - SQ) ~ SC 1 VOH efficiency variance = = 200 F Now compute the fixed overhead cost and volume variances. Select the required formulas, compute the fixed overhead cost and volume variances, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.) Formula Variance FOH cost variance = FOH volume variance = - =