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Problem E: The standard amount of output for the Chicago plant of Worldworth Company is 50,000 units per month. Overhead is applied based on units produced. The flexible budget of the month for manufacturing overhead allows $180,000 for fixed overhead and $4.80 per unit of output for variable overhead. Actual overhead for the month consisted of $181,440 of fixed overhead; the actual variable overhead is listed below in the requirements. Requirement 1: Compute the Variable Overhead Spending Variance, the Variable Overhead Efficiency Variance and the Total Overhead Variance and the Total Fixed Overhead Variance. Also indicate whether the variances are Favorable or Unfavorable. Requirement 2: Compute the variances mentioned in requirement 1 assuming the following actual production in units and actual variable overhead in dollars: a) 37,500 production in units and $182,400 actual variable overhead b) 55.000 production in units and $270,480 actual variable overhead 48 points AQ= Actual Quantity in Units SH Standard Quantity in Units AR = Actual Rate per unit (AR = Actual Variable Overhead/Actual Production in units) SR = Standard Rate per unit Do not round this number or your final calculation will not be correct. This should be 3 7 a) Overhead based on 37,500 production units and $182,400 actual variable overhead decimal places Standard Rate per unit Do not round this number or your final calculation will not be correct. This should be 3 decimal places. a) Overhead based on 37,500 production units and $182,400 actual variable overhead Variable Overhead Spending Variance - (Actual Quantity Actual Rate) - (Actual Quantity * Standard Rate) AQ AR AQ SR x per unit X per unit Variable Overhead Spending Variance = (Make sure all variance amounts are positive) Variable Overhead Efficiency Variance (Actual Quantity x Standard Rate) - (Standard Quantityx Standard Rate) AQ SR SQ SR per unit per unit Variable Overhead Efficiency Variance = (Make sure all variance amounts are positive) Total Variable Overhead Variance = Variable Overhead Spending Variance + or - Variable Overhead Efficiency Variance (Hint: If both Variances are Favorable or Unfavorable then you add them together and the Total Variance will be favorable or Unfavorable.) (if one is favorable and the other is unfavorable you will subtract the 2 and the Total Variance will take on the Favorable or Unfavorable trait of the largest variance) Variable Overhead Spending Variance = Variable Overhead Efficiency Variance = Total Variable Overhead Variance = (Make sure all variance amounts are positive) 37 38 Total Variable Overhead Variance = Variable Overhead Spending Variance + or - Variable Overhead Efficiency Variance (Hint: If both Variances are favorable or Unfavorable then you add them together and the Total Variance will be Favorable or Unfavorable.) (If one is favorable and the other is Unfavorable 39 you will subtract the 2 and the Total Variance will take on the favorable or Unfavorable trait of the largest variance) 40 41 42 2 43 * 44 Variable Overhead Spending Variance = Variable Overhead Efficiency Variance = Total Variable Overhead Variance = (Make sure all variance amounts are positive) 45 Total Fixed Overhead Variance - Actual Fixed Overhead - Budgeted Fixed Overhead 46 Actual Fixed Overhead (Given) Budgeted Fixed Overhead (Given) 47 48 49 50 Total Fixed Overhead Variance = (Make sure all variance amounts are positive) 51 52 53 54 Do not round this number or your answer 55 will be wrong. It should be carried out to 56 b) Overhead based on 55,000 production units and $270,480 actual variable overhead 5 decimal places. 57 58 Variable Overhead Spending Variance = (Actual Quantity Actual Rate) - (Actual Quantity* Standard Rate) 59 60 AQ AR AQ SR 61 per unit 62 63 64 65 Variable Overhead Spending Variance = per unit (Make sure all variance amounts are positive) 66 b) Overhead based on 55,000 production units and $270,480 actual variable overhead will be wrong. It should be carried out to 5 decimal places. Variable Overhead Spending Variance - (Actual Quantity Actual Rate) - (Actual Quantity * Standard Rate) AQ AR AQ SR per unit per unit Variable Overhead Spending Variance = (Make sure all variance amounts are positive) Variable Overhead Efficiency Variance (Actual Quantity x Standard Rate) - (Standard Quantity x Standard Rate) AQ SR SQ SR per unit per unit Variable Overhead Efficiency Variance = (Make sure all variance amounts are positive) Total Variable Overhead Variance = Variable Overhead Spending Variance + or -Variable Overhead Efficiency Variance (Hint: If both Variances are Favorable or Unfavorable then you add them together and the Total Variance will be Favorable or Unfavorable.) (If one is Favorable and the other is unfavorable you will subtract the 2 and the Total Variance will take on the Favorable or Unfavorable trait of the largest variance) Variable Overhead Spending Variance = Variable Overhead Efficiency Variance = Total Variable Overhead Variance (Make sure all variance amounts are positive)

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