Gala Enterprises Collected the Following Data Regarding Production of One

question 89

Essay

Gala Enterprises collected the following data regarding production of one of its products. Compute the variable overhead cost variance, the variable overhead spending variance, the variable overhead efficiency variance, the fixed overhead cost variance, the fixed overhead spending variance, and the fixed overhead volume variance.
$\begin{array} { l l } \text { Direct labor standard (2 hrs. @ \$15/hr.) } & \$ 30.00 \text { per finished unit } \\\text { Actual direct labor hours } & 60,800 \text { hrs. } \\\text { Budgeted units } & 31,000 \text { units } \\\text { Actual finished units produced } & 30,000 \text { units } \\\text { Standard variable OH rate } ( 2 \text { hrs. @ } \$ 14.00 / \mathrm { hr } . ) & \$ 28.00 \text { per finished unit } \\\text { Standard fixed OH rate } ( \$ 310,000 / 31,000 \text { units) } & \$ 10.00 \text { per unit } \\\text { Actual variable overhead costs incurred } & \$ 857,600 \\\text { Actual fixed overhead costs incurred } & \$ 312,000\end{array}$

---

Definitions:

Equivalent Unit

A measure used in cost accounting to express the amount of work done by an incomplete process on units of production in terms of fully completed units.

Process Costing

A costing methodology used in industries where production is continuous and costs are assigned to units of output through the manufacturing process.

First-In, First-Out

An inventory accounting method where the oldest items (first-in) are sold or used first (first-out), affecting the cost of goods sold and ending inventory valuation.

Cost Reconciliation Report

A financial report that reconciles the beginning and ending costs for a period, often used in manufacturing to track material, labor, and overhead.