The Following Standard Costs Were Developed for One of the Products

question 63

Essay

The following standard costs were developed for one of the products of Ferrars Company:
Budgeted fixed overhead for the period was £600,000, and expected capacity for the period was 20,000 direct labour hours.
During the period just ended, Ferrars produced 15,000 units using 80,000 pounds of material and 23,000 direct labour hours. Total payroll cost was £288,000. The materials cost £3.70 per pound. Actual variable overhead cost was £220,000 and actual fixed overhead cost was £640,000.
Required:

a.
Calculate the variable overhead spending (expenditure)variance and indicate whether it is favorable or unfavorable.
b.
Calculate the variable overhead efficiency variance and indicate whether it is favorable or unfavorable.
c.
Calculate the fixed overhead spending (expenditure) variance and indicate whether it is favorable or unfavorable.

---

Definitions:

Wooden Sculpture

A piece of art or decorative object carved from wood.

Safety Hazard

A condition in the workplace or environment that has the potential to cause harm or injury to people.

Market Equilibrium

A condition where the quantity of a good or service supplied equals the quantity demanded, leading to no upward or downward pressure on price.

Inefficient

A situation where resources are not used in the most effective way, leading to potential waste or lost opportunities.