FUNDAMENTAL ACCT PRIN CONNECT ACCESS
FUNDAMENTAL ACCT PRIN CONNECT ACCESS
24th Edition
ISBN: 9781266494604
Author: Wild
Publisher: MCG
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Chapter 23, Problem 22E
To determine

Overhead Controllable Variance

The difference between the total actual and budgeted overhead is known as Overhead Controllable Variance. It is the combination of both fixed and variable overhead variances.

Overhead Volume Variance

The difference between the total fixed overhead applied and total budgeted overhead is known as Overhead Volume Variance.

  1. The overhead controllable variance and find whether it is favorable or unfavorable
  2. The overhead volume variance and find whether it is favorable or unfavorable.
  3. Make a report on overhead variance with 9,000 units of activity level.

Expert Solution & Answer
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Answer to Problem 22E

Solution:

  1. The overhead controllable variance is $2,300 and it is favorable
  2. The overhead volume variance is $6,000 and it is Favorable.
  3. Overhead variance report at the actual activity level of 9000 units
    BLAZE CORP.
    Overhead Variance Report
    for the month ended March 31st.



    Planned production volume
    80% capacity
    Actual production volume
    90% capacity
    Volume variance
    $ 6,000
    Favorable
    Controllable Variance
    Flexible budget
    Actual result
    Variance
    Favorable / Unfavorable
    Variable overhead cost



    Indirect materials
    $11,250
    $10,000
    $1,250
    Favorable
    Indirect labor
    $18,000
    $16,000
    2,000
    Favorable
    Power
    $4,500
    $4,500
    0
    No Variance
    Maintenance
    $2,250
    $3,000
    $750
    Unfavorable





    Total variable cost$36,000
    $33,500
    $2,500
    Favorable





    Fixed overhead cost



    Rent of factory building
    $12,000
    $12,000
    0
    No variance
    Depreciation- Machinery
    $20,000
    $19,200
    $800
    Favorable
    Taxes and insurance
    $2,400
    $3,000
    $600
    Unfavorable
    Supervisory
    salary
    $13,600
    $14,000
    $400
    Unfavorable





    Total fixed cost$48,000
    48,200
    $200
    Unfavorable
    Total Overhead cost$84,000
    99,250
    $2,300
    Favorable

Explanation of Solution

  • Overhead controllable variance computation
    • Controllable Variance
      Actual overhead total

      $ 81,700

      Flexible budget overhead total



      Variable
      $36,000


      Fixed
      $48,000


      Total

      $ 84,000





      Overhead controllable variance

      $ 2,300
      Favorable
  • Overhead volume variance computation
    • Volume Variance
      Budgeted fixed overhead cost (32,000 X $1.50)
      $48,000

      Applied Fixed overhead cost (36,000 X $1.50)
      $54,000




      Volume variance
      $ 6,000
      Favorable

    Computation of applied fixed overhead cost

    3. Flexible budget at 90% capacity (9,000 units)

      JAMES CORP.
      Flexible Overhead Budget
      for the month ended May 31st.

      Variable overhead per unit
      Fixed overhead per month
      Flexible Budget at 90% capacity (9,000 units)
      Variable overhead cost


      Indirect materials
      $1.25

      $11,250
      Indirect labor
      $2.00

      $18,000
      Power
      $0.50

      $4,500
      Maintenance
      $0.25

      $2,250




      Total variable cost$4.00

      $36,000




      Fixed overhead cost


      Rent of factory building

      $12,000
      $12,000
      Depreciation- Machinery

      $20,000
      $20,000
      Taxes and insurance

      $2,400
      $2,400
      Supervisory salary

      $13,600
      $13,600




      Total fixed cost
      $48,000
      $48,000
      Total Overhead cost

      $84,000
    Conclusion

    From the above it is clear with the following;-
    The overhead controllable variance is favorable with $ 2,300
    The volume variance is favorable with $ 6,000

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    Chapter 23 Solutions

    FUNDAMENTAL ACCT PRIN CONNECT ACCESS

    Ch. 23 - Prob. 11DQCh. 23 - Prob. 12DQCh. 23 - Prob. 13DQCh. 23 - How can the manager of advertising sales at Google...Ch. 23 - Prob. 15DQCh. 23 - Prob. 16DQCh. 23 - Is it possible to evaluate a cost center’s...Ch. 23 - Prob. 18DQCh. 23 - Prob. 1QSCh. 23 - Prob. 2QSCh. 23 - Prob. 3QSCh. 23 - Prob. 4QSCh. 23 - Prob. 5QSCh. 23 - Prob. 6QSCh. 23 - Prob. 7QSCh. 23 - Prob. 8QSCh. 23 - Prob. 9QSCh. 23 - Prob. 10QSCh. 23 - Prob. 11QSCh. 23 - Prob. 12QSCh. 23 - Prob. 13QSCh. 23 - Prob. 14QSCh. 23 - Volume variance P3 Refer to information in QS...Ch. 23 - Prob. 16QSCh. 23 - Prob. 17QSCh. 23 - Prob. 18QSCh. 23 - Prob. 19QSCh. 23 - Prob. 20QSCh. 23 - Prob. 21QSCh. 23 - Prob. 22QSCh. 23 - Prob. 23QSCh. 23 - Prob. 24QSCh. 23 - Exercise 23-1 Management by exception C1 Resset...Ch. 23 - Prob. 2ECh. 23 - Exercise 23-2 Preparing flexible budgets P1 Tempo...Ch. 23 - Prob. 4ECh. 23 - Prob. 5ECh. 23 - Prob. 6ECh. 23 - Prob. 7ECh. 23 - Prob. 8ECh. 23 - Prob. 9ECh. 23 - Prob. 10ECh. 23 - Prob. 11ECh. 23 - Prob. 12ECh. 23 - Exercise 23-13 Computing and interpreting...Ch. 23 - Prob. 14ECh. 23 - Exercise 23-15 Direct materials and direct labor...Ch. 23 - Prob. 16ECh. 23 - Prob. 17ECh. 23 - Exercise 23-18A Detailed overhead variances P5...Ch. 23 - Prob. 19ECh. 23 - Prob. 20ECh. 23 - Prob. 21ECh. 23 - Prob. 22ECh. 23 - Prob. 23ECh. 23 - Prob. 1APSACh. 23 - Prob. 2APSACh. 23 - Prob. 3APSACh. 23 - Prob. 4APSACh. 23 - Prob. 5APSACh. 23 - Prob. 6APSACh. 23 - Prob. 2BPSBCh. 23 - Prob. 3BPSBCh. 23 - Prob. 4BPSBCh. 23 - Prob. 5BPSBCh. 23 - Prob. 6BPSBCh. 23 - Prob. 23SPCh. 23 - Flexible budgets and standard costs emphasize the...Ch. 23 - Prob. 2AACh. 23 - Prob. 3AACh. 23 - Prob. 1BTNCh. 23 - Prob. 2BTNCh. 23 - Prob. 3BTNCh. 23 - Prob. 4BTNCh. 23 - Prob. 5BTNCh. 23 - Training employees to use standard amounts of...
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    What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY