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Question & Answer: Assume the following data for John Company's August operations. (a) Compute the amount of over…..

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Assume the following data for John Companys August operations. Standard overhead per direct labor hour based on normal monthly capacity of 30,000 hours Fixed ($270,000/30,000 hours) Variable ($660,000 /30,000 hours) $9 23 $31 28,000 hours $824,000 Direct labor hours actually worked in August Actual overhead costs incurred (inc luding $270,000 fixed costs) (a) Compute the amount of overhead applied to Work-in-Process during August. (b) Compute the total manufacturing overhead budgeted based on hours worked during August. (c) Compute the overhead spending variance for August. Indicate whether favorable (F) or unfavorable (U). S (d) Compute the overhead volume variance for August. Indicate whether favorable (F) or unfavorable (U). S

Assume the following data for John Company’s August operations. (a) Compute the amount of overhead applied to Work-in-Process during August. $ _______ (b) Compute the total manufacturing overhead budgeted based on hours worked during August. __________ (c) Compute the overhead spending variance for August. Indicate whether favorable (F) or unfavorable (U). $ _________ (d) Compute the overhead volume variance for August. Indicate whether favorable (F) or unfavorable (U). $ ___________

Expert Answer

 

a) Amount of OH applied = 30000 * 31 = $ 930000

b) Total manufacturing OH budgeted :-

Variable OH ( 22 * 28000 actual hours worked ) + Fixed OH 270000

= $ 886000

c) OH spending variance = Budgeted OH – Actual OH

886000 – 824000 = $ 62000 ( favourable )

d) OH volume variance = ( standard hours – budgeted hours ) * SR

( 28000 – 30000 ) * 9 = 18000 ( unfavourable )

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