Algood Incorporated Is Trying to Decide Which Method of Analyzing

question 15

Essay

Algood Incorporated is trying to decide which method of analyzing its overhead variances provides the most useful information.The following information is available from the records for April: $\begin{array}{|l|r|}\hline \text { Budgeted units of output } & 4,000 \text { tor April } \\\hline \text { Budgeted fixed ouerhead } & \$ 27,000 \text { month } \\\hline \text { Budgeted variable overhead } & \$ 6 / D L H \\\hline \text { Budgeted direct labor hours } & 3 \text { hoursiunit } \\\hline \text { Fixed owerhead incurred } & \$ 26,600 \\\hline \text { Direct labor hours used } & 12,000 \\\hline \text { Variable overhead incurred } & \$ 71,500 \\\hline \text { Actual units produced } & 4,200 \\\hline\end{array}$

Required:
Compute the overhead variances using the following approaches;
(1)Four-way analysis
(2)Three-way analysis
(3)Two-way analysis

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Definitions:

Present Value

The value of an asset or cash at present that is equivalent in value to a specified sum in the future.

Average Rate of Return

A financial ratio used to estimate the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Average Rate of Return

A calculation to determine the profitability of an investment, measuring the average annual return over the investment's lifespan compared to the initial cost.

Estimated Average Annual Income

The projected amount of money one expects to earn on average each year, often used for budgeting and planning purposes.