1. The total variable overhead variance is $1,525,500 favorable.
2. The total fixed overhead variance is $46,200 favorable.
1. Total variable overhead variance:
Standard variable overhead rate = 4.50 per direct labor hour (DLH)
Actual direct labor hours = 371,000 hours
Budgeted direct labor hours (at 70% capacity) = 32,000 hours
Calculation:
Total variable overhead variance = (Standard variable overhead rate x Actual DLH) - (Standard variable overhead rate x Budgeted DLH)
= (4.50 x 371,000) - (4.50 x 32,000)
= 1,669,500 - 144,000
= 1,525,500
Favorability: Since the actual variable overhead is less than the standard variable overhead, the variance is favorable.
2. Total fixed overhead variance:
Standard fixed overhead per unit = $22.00
Budgeted production units (at 70% capacity) = 39,200 units
Actual production units = 37,100 units
Calculation:
Total fixed overhead variance = (Standard fixed overhead per unit x (Budgeted production units - Actual production units))
= (22.00 x (39,200 - 37,100))
= 22.00 x 2,100
= 46,200
Favorability: Since the actual production units are less than the budgeted production units, the variance is favorable.
The question probable may be:
Exercise 21-27A (Algo) Computing total variable and fixed overhead variances LO P5
1. Compute the total variable overhead variance and identify it as favorable or unfavorable. (Indicate the effect of the variance by selecting favorable, unfavorable, or no variance.)
2. Compute the total fixed overhead variance and identify it as favorable or unfavorable. (Indicate the effect of the variance by selecting favorable, unfavorable, or no variance.)