Answer:
Berlin Ltd.
1. Overhead spending variance
= $4,530 F
2. Overhead efficiency variance
= $2,262 U
3. Overhead volume variance
= $741 U
Explanation:
a) Data and Calculations:
Combined overhead rate per machine hour = $2.90
Annual expected capacity = 264,000
Machine hours required per unit of product = 2 hours
Total combined expected overhead = $765,600 ($2.90 * 264,000)
Expected fixed overhead = $250,800
Expected variable overhead = $514,800 ($765,600 - $250,800)
Fixed overhead per machine hour = $0.95 ($250,800/264,000)
Variable overhead per machine hour = $1.95 ($514,800/264,000)
November Usage and Production:
Production units = 11,960 units
Standard machine hours = 23,920 (11,960 * 2)
Actual machine hours used = 24,700
Actual variable overhead for the month = $47,100
Variable overhead per machine hour = $1.90688
Standard variable overhead cost = $48,165 ($1.95 * 24,700)
Actual fixed overhead = $20,000
Standard fixed overhead = $23,465 ($0.95 * 24,700)
1. Overhead spending variance = Standard overhead - Actual overhead
= ($2.90 * 24,700 - ($47,100 + $20,000))
= ($71,630 - $67,100
= $4,530 F
2. Overhead efficiency variance = (standard machine hours allowed for production – actual machine hours used) × standard overhead absorption rate per hour
= (23,920 - 24,700) * $2.90
= $2,262 U
3. Overhead volume variance = (Standard machine hours - Actual machine hours) * Standard Fixed Overhead Rate
= (23,920 - 24,700) * $0.95
= $741 U
