The Condensed Flexible Budget of the Evergreen Company for the Year

question 9

Essay

The condensed flexible budget of the Evergreen Company for the year is given below:
Direct labor-hours
The company produces a single product that requires 2.5 direct labor-hours to complete.The direct labor wage rate is $7.50 per hour.Three yards of raw material are required for each unit of product,at a cost of $5 per yard.Assume that the company chooses 50,000 direct labor-hours as the denominator level of activity,but actually worked 48,000 hours during the year,producing 18,500 units.Actual overhead costs for the year are: $$\begin{array} { | l | r | } \hline \text { Variable costs } & \$ 124,800 \\\hline \text { Fixed costs } & \underline { 321,700 } \\\hline \text { Total overhead costs } & \underline { \$ 446,500 }\\\hline\end{array}$$
Required:
(Be sure to indicate whether the variances are favorable or unfavorable. )
a.Compute the variable overhead price variance and the variable overhead efficiency variance.b.Compute the fixed overhead spending (budget)variance and the production volume variance.

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Definitions:

Knowledge Management

The process of creating, sharing, using, and managing the knowledge and information of an organization, to enhance learning and performance.

Open System

In organizations or technology, this term refers to systems that interact with their environment, exchanging information or resources.

Closed System

A system that does not interact with or exchange resources with its external environment, often used in the context of organizational operations.

Transformation System

A process that converts inputs into outputs through a series of operations, aiming at increasing value or utility.