Question

Russo Corporation manufactured 16,000 air conditioners during November. The overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November:

Actual Budgeted
Production 16,000 units 18,000 units
Machine-hours 7,875 hours 9,000 hours
Variable overhead cost per machine-hour: $31.00 $31.50

30) What is the actual variable overhead cost?
A) $244,125
B) $279,000
C) $248,063
D) $250,000

31) What is the flexible-budget amount?
A) $248,033
B) $252,000
C) $248,000
D) $279,000

32) What is the variable overhead spending variance?
A) $4,500 unfavorable
B) $3,937.50 unfavorable
C) $4,500 favorable
D) $3,937.50 favorable

33) What is the variable overhead efficiency variance?
A) $3,937.50 favorable
B) $3,937.50 unfavorable
C) $4,500 favorable
D) $4,500 unfavorable

34) What is the total variable overhead variance
A) $7,875 unfavorable
B) $3,937.50 f unfavorable
C) $7,875 favorable
D) $3,937.50 f favorable

Answer 1

The actual variable overhead cost is $244,125, the flexible-budget amount is $248,063, the variable overhead spending variance is $3,937.50 unfavorable, the efficiency variance is $35,437.50 unfavorable, and the total variable overhead variance is $39,375 unfavorable.

Step-by-step explanation:

The variables provided in the question pertain to managerial accounting practices, specifically in the realm of cost accounting and variance analysis. To solve the problems stated, we'll use the actual and budgeted figures to calculate the variable overhead costs, the flexible-budget amount, spending variance, efficiency variance, and the total variance.

Actual Variable Overhead Cost: This is computed by multiplying the actual machine-hours by the actual variable cost per machine-hour. Hence, 7,875 hours × $31.00 = $244,125 (Option A).

Flexible-Budget Amount: The flexible-budget is based on the actual production level and the budgeted cost per machine-hour. Thus, 7,875 hours × $31.50 = $248,062.50, which can be rounded to $248,063 (Option C).

Variable Overhead Spending Variance: This is the difference between actual spending and what the spending should have been for the actual level of activity, calculated as ($31.00 - $31.50) × 7,875 hours = - $3,937.50, indicating an unfavorable variance because actual spending is less than budgeted on a per-hour basis (Option B).

Variable Overhead Efficiency Variance: This measures the efficiency with which the variable overhead cost-allocation base is used, computed as ($31.50 × (9,000 hours - 7,875 hours)) = $35,437.50, which is unfavorable since there are fewer machine hours than expected (Option D).

Total Variable Overhead Variance: This is the sum of the spending and efficiency variances. When both variances are unfavorable, they are added to get the total variance, which is $3,937.50 + $35,437.50 = $39,375.00 (Option B).