Question

Longman Company manufactures shirts. During June​, Longman made 1,900 shirts but had budgeted production at 2,150 shirts. Longman gathered the following additional​ data:

Variable overhead cost standard $0.80 per DLHr
Direct labor efficiency standard 4.50 DLHr per shirt
Actual amount of direct labor hours 8,620 DLHr
Actual cost of variable overhead $10,344
Fixed overhead cost standard $0.10 per DLHr
Budgeted fixed overhead $968
Actual cost of fixed overhead $1,033

Required:
a. Calculate the variable overhead cost variance.
b. Calculate the variable overhead efficiency variance.
c. Calculate the total variable overhead variance.
d. Calculate the fixed overhead cost variance.
e. Calculate the fixed overhead volume variance

Answer 1

a. variable overhead cost variance- $3,448 Unfavorable

b. variable overhead efficiency variance- $ 56 unfavorable

c. total variable overhead variance - $3,504 Unfavorable

d. fixed overhead cost variance - $65 unfavorable

e. Fixed overhead volume variance -$ 112.5 unfavorable

Step-by-step explanation:

Variable overhead rate variance $

8,620 hours should have cost (8,620 × $0.80) 6896

but did cost 10,344

Variable overhead rate variance 3,448 Unfavorable

Variable overhead rate variance =$3,448 unfavorable

Efficiency variance Hours

190 units should have taken (1,900 × 4.50 hrs) 8,550

but did take 8,620

Efficiency variance in hours 70 unfavorable

Standard rate × $0.80

Efficiency variance $ 56 unfavorable

Efficiency variance =$ 56 unfavorable

Total variable overhead= rate variance +efficiency

Total variable overhead = $3,448 UF + $ 56 UF = $3,504 U

Total variable overhead = $3,504 Unfavorable

Fixed overhead cost variance

$

Budgeted cost 968

Actual cost 1,033

Fixed overhead cost Variance 65 unfavorable

Fixed Overhead Volume

Units

Budgeted units 2,150

Actual units 1,900

Variance 250

Standard fixed cost per unit (Notes) $0.45

Volume Variance 112.5 unfavorable

Standard fixed overhead cost per unit

= standard hours × standard Fixed overhead rate = 4.5 × $0.1= $0.45

a. variable overhead cost variance- $3,448 Unfavorable

b. variable overhead efficiency variance- $ 56 unfavorable

c. total variable overhead variance - $3,504 Unfavorable

d. fixed overhead cost variance - $65 unfavorable

e. Fixed overhead volume variance -$ 112.5 unfavorable