Problem $3$: Overhead Costs Variances

Jailene Inc allocates overhead costs using the direct labor hour as the allocation base. It has provided the following manufacturing overhead data:

Data

Number of production units

Direct labor hour $($DLH$)*$ per unit

Total direct labor hours

VMOH

FMOH

Total MOH

Standard VMOH rate per hour

Standard FMOH rate per hour

MOH rate per hour

Required:

A$.$ Calculate Variable MOH flexible budget cost variance.

B$.$ Calculate Fixed MOH volume variance.

C$.$ Calculate the total MOH 'variance.

Solution:

A$.$ Variable MOH flexible budget costvariance $=$ Actual Variable MOH costs $-$ Budgeted Variable MOH costs

Actual Variable MOH costs

Budgeted Variable MOH costs

Variable MOH flexible budget cost variance:

B$.$ Fixed MOH Volume variance $=$ Budgeted FMOH costs for Planned Production $-$ Budgeted FMOH cost applied to Actual Production

Budgeted FMOH costs for Planned Production

Budgeted FMOH cost applied to Actual Production

Fixed MOH Volume variance

$32$

$\frac{3}{3}$

$36$

$3$

$3$

$\frac{40}{41}$

$2$

$1D$

Problem$1$

Problem$2$

$\backslash$table$[[$Actual$,$Budgeted or Standard,$],[53,000,50000,$units$],[0\mathrm{.}55,0\mathrm{.}72,$DLH per unit$],[29,150,36,000,$DLH$],[$$$145,000,$$$144,000,],[$$$65,000,$$$72,000,],[210,000,$

Formulae:

Variable MOH Flexible budget cost variance $=$ Actual Variable MOH costs $-$ Budgeted Variable MOH costs Budgeted Variable MOH costs $=$ Standard Variable MOH rate $x$ Standard hours for Actual Production

Fixed MOH Volume Variance $=$ Budgeted FMOH costs for Planned Production $-$ Budgeted FMOH cost applied to Actual Production