Question

Understanding Relationships between Overhead Variances, Budgeted Amounts, and Actual Units Produced and Direct Labor Hours Worked Last year, Gladner Company had planned to produce 140,000 units. However, 143,000 units were actually produced. The company uses direct labor hours to assign overhead to products. Each unit requires 0.9 standard hour of labor for completion. The fixed overhead rate was $11 per direct labor hour, and the variable overhead rate was $6.36 per direct labor hour. The following variances were computed:
Fixed overhead spending variance $24,000 U
Variable overhead spending variance $9,196 U
Fixed overhead volume variance 29,700 F
Variable overhead efficiency variance 1,272 U
Required:
1. Calculate the total applied fixed overhead.
2. Calculate the budgeted fixed overhead.
3. Calculate the actual fixed overhead.
4. Calculate the total applied variable overhead.
5. Calculate the number of actual direct labor hours.
6. Calculate the actual variable overhead.

Answer 1

Answer:

Explanation:

1) Fixed Overhead applied = Actual unit produced * Standard hour * Direct labor hour

Fixed Overhead applied = 143,000 * 0.9 * $11

Fixed Overhead applied = $1,415,700

2) Budgeted fixed overhead = 140,000 * 0 .9 * $11

Budgeted fixed overhead = $1,386,000

3) Actual fixed overhead = Spending variance + Budgeted overhead

Actual fixed overhead = $24,000 + $1,386,000

Actual fixed overhead = $1,410,000

4) Applied variable overhead = 143000*0.9*$6.36

Applied variable overhead = $818,532

5) Variable efficiency variance = (AH*SR) - (SH*SR)

1272 = (AH * 6.36) - 818,532

1272 + 818,532 = AH *6.36

AH = 819804/ 6.36

Actual hours = 128,900 hours

6) Variable spending variance = AH*(AR -SR)

9196 = 128,900( AR - 6.36)

9196 /128,900 = AR - 6.36

0.07134 = AR - 6.36

AR = 0.07134 + 6.36

AR = $6.43 per labor hour

Actual overhead = $6.43 * 128,900

Actual overhead= $828,827