Question

Zitrik Corporation manufactured 90,000 buckets during February. The variable overhead cost-allocation base is $5.05 per machine-hour. The following variable overhead data pertain to February:

Actual Budgeted
Production 90,000 units 90,000 units
Machine-hours 9,800 hours 9,000 hours
Variable overhead cost per machine-hour $5.15 $5.05

22) What is the actual variable overhead cost?
A) $463,500
B) $436,500
C) $50,470
D) $49,490

23) What is the flexible-budget amount?
A) $49,490
B) $45,450
C) $46,350
D) $47,650

24) What is the variable overhead spending variance?
A) $980 favorable
B) $900 unfavorable
C) $980 unfavorable
D) $900 favorable

25) What is the variable overhead efficiency variance?
A) $4,040 unfavorable
B) $4,120 favorable
C) $4,040 favorable
D) $4,120 unfavorable.

Answer 1

The actual variable overhead cost is $50,470, the flexible-budget amount is $45,450, the variable overhead spending variance is $5,020 unfavorable, and the variable overhead efficiency variance is $4,040 unfavorable.

Step-by-step explanation:

The actual variable overhead cost can be calculated by multiplying the actual machine-hours by the variable overhead cost per machine-hour. In this case, the actual machine-hours are 9,800 hours and the variable overhead cost per machine-hour is $5.15. Therefore, the actual variable overhead cost is $5.15 x 9,800 = $50,470 (option C).

The flexible-budget amount can be determined by multiplying the budgeted production units by the variable overhead cost per machine-hour. In this case, the budgeted production units are 90,000 units and the variable overhead cost per machine-hour is $5.05. Therefore, the flexible-budget amount is $5.05 x 9,000 = $45,450 (option B).

The variable overhead spending variance measures the difference between the actual variable overhead cost and the flexible-budget amount. In this case, the actual variable overhead cost is $50,470 and the flexible-budget amount is $45,450. Therefore, the variable overhead spending variance is $50,470 - $45,450 = $5,020 unfavorable (option C).

The variable overhead efficiency variance measures the difference between the flexible-budget amount and the product of the actual machine-hours and the variable overhead cost per machine-hour. In this case, the flexible-budget amount is $45,450 and the product of the actual machine-hours and the variable overhead cost per machine-hour is ($5.05 x 9,800) = $49,490. Therefore, the variable overhead efficiency variance is $45,450 - $49,490 = $4,040 unfavorable (option A).