The Following Information Relates to Manufacturing Overhead for the Chapman

question 105

Short Answer

The following information relates to manufacturing overhead for the Chapman Company:
Standards:
Total fixed factory overhead - $450,000
Estimated production - 25,000 units (100% of normal capacity)
Overhead rates are based on machine hours
Standard hours allowed per unit produced - 2
Fixed overhead rate - $9.00 per machine hour
Variable overhead rate - $3.50 per hour
Actual: Fixed factory overhead - $450,000
Production - 24,000 units
Variable overhead - $170,000
Compute:
(a) the fixed factory overhead volume variance
(b) the variable factory overhead controllable variance
(c) the total factory overhead cost variance.

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Definitions:

Constrained Resource

A factor within a production or operation process that limits the overall output, such as limited machinery, labor, or materials.

Direct Labour-Hours

The total hours worked by employees directly involved in the manufacturing process, used as a basis for assigning labor costs to products.

Contribution Margin

The difference between sales revenue and variable costs, representing the portion of sales that contributes to covering fixed costs.

Production Constraint

A limit to the amount or volume of production, often caused by the availability of resources, technology, or market demand.