Nova Corporation Produces a Single Product and Uses a Standard

question 75

Essay

Nova Corporation produces a single product and uses a standard cost system to help control costs.Overhead is applied to production on the basis of standard machine-hours.According to the company's flexible budget,the following overhead costs should be incurred at an activity level of 18,000 machine-hours (the denominator activity level chosen for the current year): During the current year,the following operating results were recorded: At the end of the year,the company's Manufacturing Overhead account showed total debits for actual overhead costs of $145,100 and total credits of $136,000 for overhead applied.The difference ($9,100)represents under-applied overhead,the cause of which management would like to know.
Required:
a.Compute the predetermined overhead rate that would have been used during the year,showing separately the variable and fixed components of the rate.
b.Show how the $136,000 of overhead actually applied was computed.
c.Analyze the $9,100 under-applied overhead figure in terms of the variable overhead rate and efficiency variances and the fixed manufacturing overhead budget and volume variances.

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Definitions:

Anecdotes

Short, often amusing or interesting stories about real incidents or people.

Experiments

Controlled procedures carried out to investigate the effects of a variable by systematically manipulating it and observing the outcome.

Phrenologists

Practitioners of phrenology, a now-discredited theory that linked the shape of an individual's skull with their personality traits and mental abilities.

Theory Of Phrenology

A now-discredited theory that proposed the shape and size of the skull could determine a person's character and mental abilities.