Question

Synder Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Synder produced 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Fixed overhead per DLH $3.10 Budgeted variable overhead $21,875 Budgeted fixed overhead $38,750 Actual: Direct labor hours 10,000 Variable overhead $26,250 Fixed overhead $38,000 Refer to Synder Company. Using the two-variance approach, what is the noncontrollable variance

Answer 1

Fixed overhead volume variance =$3,875 adverse

Step-by-step explanation:

The non-controllable variance is the fixed overhead volume variance. It is the sum of the fixed overhead efficiency variance and the fixed overhead capacity variance

The efficiency variance is the difference between the standard hours of actual production and the actual hours multiplied by the fixed overhead absorption rate

Capacity variance is the difference budgeted hours and actual hours multiplied by the Fixed overhead absorption rate

Efficiency variance $

4500 units should have taken (4500×2.50) 11,250

but did take 10,000

variance in hours 1250

Standard Fixed overhead absorption rate× $3.10

Efficiency variance 3,875 favorable

capacity variance $

Budgeted hours (38750/3.10) 12,500

Actual hours 10,000

Variance 2,500 adverse

Standard rate × $3.10

Capacity variance 7,750 adverse

Volume variance = 7750 adverse + 3,875 favorable =$3875 adverse

Fixed overhead volume variance =$3,875 adverse