Question

Ecocomfort Corporation manufactured 1,000 coolers during October. The following variable overhead data relates to October:

Variable overhead spending variance $1,230 Unfavorable
Variable overhead efficiency variance $175 Unfavorable
Budgeted machine hours allowed for actual output 615 machine hours
Actual cost per machine hour $27
Budgeted cost per machine hour $25

20) Calculate the actual machine hours used by Stark during October.
A) 622 hours
B) 615 hours
C) 608 hours
D) 620 hours

21) Calculate the variable overhead flexible-budget variance.
A) $1,055 unfavorable
B) $1,055 favorable
C) $1,405 unfavorable
D) $1,405 favorable

Answer 1

The actual machine hours used during October were 615 hours, and the variable overhead flexible-budget variance was $1,405 unfavorable.

Step-by-step explanation:

Your questions relate to the computation of machine hours and the variance analysis in a manufacturing context. Let's calculate the actual machine hours used during October and the variable overhead flexible-budget variance.

To find the actual machine hours used, we need to consider the variable overhead spending variance and the actual cost per machine hour. The spending variance is calculated as:

Spending Variance = (Actual Cost per Machine Hour - Budgeted Cost per Machine Hour) x Actual Machine Hours Used

Given a $1,230 unfavorable variance and the fact that the actual cost per hour was $27, while the budget cost was $25, we can set up the equation:

$1,230 = ($27 - $25) x Actual Machine Hours Used

Actual Machine Hours Used = $1,230 / $2 = 615 hours.

To calculate the variable overhead flexible-budget variance, which is the combination of spending and efficiency variances, we add the given unfavorable efficiency variance to the previously calculated spending variance:

Flexible Budget Variance = Spending Variance + Efficiency Variance
= $1,230 + $175
= $1,405 unfavorable.