Carl Jones Company's Master Budget for the Year Just Completed

question 129

Essay

Carl Jones Company's master budget for the year just completed was based on 100% capacity and included 50,000 machine hours and $300,000 total factory overhead. (That is, the denominator volume, for purposes of calculating the fixed overhead application rate, is defined as 100% capacity.) Budgeted fixed overhead at 70% factory capacity is $200,000 (and 35,000 machine hours). The company operated at 80% capacity for the year, and incurred $275,000 total factory overhead.Required:
1. Determine the total overhead flexible-budget variance (to the nearest dollar) for the year just completed. Show calculations.
2. Determine the fixed overhead production-volume variance (to the nearest dollar) for the year just completed. Show calculations.
3. Provide a short discussion/interpretation of each of the above-two variances.

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Definitions:

Accounting Errors/Irregularities

Unintentional or intentional misstatements or omissions in financial statements resulting from oversight, misinterpretation, or fraud.

SEC

The United States Securities and Exchange Commission is a federal entity tasked with the enforcement of federal securities legislation and the oversight of the securities sector.

Accounting Irregularities

Deviations from standard accounting practices, often indicating error or fraud, which can lead to misstated financial reports.

Companies' Filings

Documents and reports that businesses are required to submit to regulatory authorities, containing financial and other important information about the company.