The Following Standard Overhead Costs Were Developed for One of the Products

question 132

Essay

The following standard overhead costs were developed for one of the products of Windrun Company:
The following information is available regarding the company's operations for the period:
$\begin{array}{llr}\text { Variable overhead: } & 5 \text { hours } \times \$ 4 \text { per hour } & 20.00 \\\text { Fixed overhead: } & 5 \text { hours } \times \$ 15 \text { per hour } & 75.00 \\\text { Total standard overhead cost per unit } & & \$ 95.00\end{array}$ Budgeted fixed overhead for the period is $1,350,000,and the standard fixed overhead rate is based on expected capacity of 90,000 direct labour hours.
Required:
$$\begin{array} { l l } \text { Units produced } & 20,000 \\\text { Direct labour } & 115,000 \text { hours } \\\text { Overhead incurred: } &\\\text { Variable } & \$ 437,500 \\\text { Fixed } & \$ 1,320,000\end{array}$$ A. Calculate the variable overhead spending variance and indicate whether it is favourable or unfavourable.
B. Calculate the variable overhead efficiency variance and indicate whether it is favourable or unfavourable.
C. Calculate the fixed overhead spending variance and indicate whether it is favourable or unfavourable.
D. Calculate the fixed overhead volume variance and indicate whether it is favourable or unfavourable.

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Definitions:

Non-Value-Added Activities

Non-value-added activities are processes or endeavors that do not contribute to the customer's perceived value of a product or service, often targeted for elimination in efficiency efforts.

Time Drivers

Factors that measure the amount of time required to perform an activity, often used to allocate costs in various accounting methods.

Inventory Management

The administration of overseeing the ordering, storing, and using a company's inventory.

Six Sigma

A set of techniques and tools for process improvement aiming at reducing defects and variability in manufacturing and business processes.