Creger Corporation, which makes landing gears, has provided the following data for a recent month:

153. Creger Corporation, which makes landing gears, has provided the following data for a recent month:

           

	Budgeted production.................................	7,900	gears
	Standard machine-hours per gear..............	9.3	machine-hours
	Budgeted supplies cost..............................	$6.20	per machine-hour
	Actual production......................................	8,300	gears
	Actual machine-hours...............................	76,930	machine-hours
	Actual supplies cost (total)........................	$479,438

            Required:

           

            Determine the total variance, the spending variance, and the efficiency variance for the variable overhead item supplies cost that would appear on the company's variable overhead performance report. Show your work!

            Ans: 

Budgeted machine-hours (9.3 × 7,900)................................................	73,470
Actual machine-hours..........................................................................	76,930
Standard machine-hours allowed for the actual output (9.3 × 8,300)..	77,190

Variable overhead costs:	Cost Formula (per machine-hour)	(1) Actual Costs Incurred 76,930 Machine-Hours	(2) Flexible Budget Based on 76,930 Machine-Hours	(3) Flexible Budget Based on 77,190 Machine-Hours
Supplies cost.....................	$6.20	$479,438	$476,966	$478,578

Variable overhead costs:	Total Variance (1) − (3)	Spending Variance (1) − (2)	Efficiency Variance (2) − (3)
Supplies cost.....................	$860 U	$2,472 U	$1,612 F

           

    154. Bondi Corporation makes automotive engines. For the most recent month, budgeted production was 1,500 engines. The budgeted power cost is $3.10 per machine-hour. The company's standards indicate that each engine requires 9.3 machine-hours. Actual production was 1,800 engines. Actual machine-hours were 15,860 machine-hours. Actual power cost totaled $51,593.

           

            Required:

           

            Determine the total variance, the spending variance, and the efficiency variance for the variable overhead item power cost that would appear on the company's variable overhead performance report. Show your work!

            Ans: 

Budgeted machine-hours (9.3 × 1,500)...................................................	13,950
Actual machine-hours.............................................................................	15,860
Standard machine-hours allowed for the actual output (9.3 × 1,800).....	16,740

Variable overhead costs:	Cost Formula (per machine-hour)	(1) Actual Costs Incurred 15,860 Machine-Hours	(2) Flexible Budget Based on 15,860 Machine-Hours	(3) Flexible Budget Based on 16,740 Machine-Hours
Power cost.......................	$3.10	$51,593	$49,166	$51,894

Variable overhead costs:	Total Variance (1) − (3)	Spending Variance (1) − (2)	Efficiency Variance (2) − (3)
Power cost.......................	$301 F	$2,427 U	$2,728 F

           

    155. Hykes Corporation's flexible budget for two levels of activity appears below:

           

		Cost Formula (per machine-hour)	Activity (in machine-hours)
			3,000	3,100
	Variable overhead costs:
	Supplies................................	$4.40	$ 13,200	$ 13,640
	Indirect labor........................	4.40	13,200	13,640
	Total variable overhead cost...	$8.80	26,400	27,280
	Fixed overhead costs:
	Salaries.................................		55,800	55,800
	Depreciation.........................		58,590	58,590
	Total fixed overhead cost........		114,390	114,390
	Total overhead cost.................		$140,790	$141,670

            Required:

           

            Determine the predetermined overhead rate if the denominator level of activity is 3,100 machine-hours. Show your work!

            Ans: 

Predetermined overhead rate

= Overhead from the flexible budget/Denominator level of activity

= $141,670/3,100 machine-hours = $45.70 per machine-hour

           

            LO:  5    

    156. Benoit Corporation has provided its flexible budget for two levels of activity:

           

		Cost Formula (per machine-hour)	Activity (in machine-hours)
			5,600	5,700
	Variable overhead costs:
	Supplies......................................	$ 4.60	$ 25,760	$ 26,220
	Wearing tools.............................	8.60	48,160	49,020
	Total variable overhead cost.........	$13.20	73,920	75,240
	Fixed overhead costs:
	Salaries.......................................		201,096	201,096
	Occupancy costs.........................		354,312	354,312
	Total fixed overhead cost..............		555,408	555,408
	Total overhead cost.......................		$629,328	$630,648

            Required:

           

            Determine the predetermined overhead rate for the denominator level of activity of 5,700 machine-hours. Show your work!

            Ans: 

Predetermined overhead rate

= Overhead from the flexible budget/Denominator level of activity

= $630,648/5,700 machine-hours = $110.64 per machine-hour

           

            LO:  5    

    157. Coppin Corporation has provided the following data for August.

           

	Denominator level of activity..................	5,600	machine-hours
	Budgeted fixed overhead costs................	$196,560
	Fixed portion of the predetermined overhead rate........................................	$35.10	per machine-hour
	Actual level of activity.............................	5,800	machine-hours
	Standard machine-hours allowed for the actual output.........................................	6,000	machine-hours
	Actual fixed overhead costs.....................	$193,710

            Required:

           

a.      Compute the budget variance for August. Show your work!

b.     Compute the volume variance for August. Show your work!

            Ans: 

a.      Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost

= $193,710 − $196,560 = $2,850 F

b.     Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours − Standard hours allowed)

= $35.10 × (5,600 − 6,000) = $14,040 F

          

    158. Holl Corporation has provided the following data for November.

           

	Denominator level of activity............................	4,800	machine-hours
	Budgeted fixed overhead costs...........................	$56,640
	Standard machine-hours allowed for the actual output..............................................................	5,100	machine-hours
	Actual fixed overhead costs...............................	$55,860

            Required:

           

a.      Compute the budget variance for November. Show your work!

b.     Compute the volume variance for November. Show your work!

            Ans: 

a.      Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost

= $55,860 − $56,640 = $780 F

b.     Fixed portion of the predetermined overhead rate

= $56,640/4,800 machine-hours = $11.80 per machine-hour

Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours − Standard hours allowed)

= $11.80 × (4,800 − 5,100) = $3,540 F

          

    159. Wangerin Corporation applies overhead to products based on machine-hours. The denominator level of activity is 6,900 machine-hours. The budgeted fixed overhead costs are $240,810. In April, the actual fixed overhead costs were $245,640 and the standard machine-hours allowed for the actual output were 7,200 machine-hours.

           

            Required:

           

a.      Compute the budget variance for April. Show your work!

b.     Compute the volume variance for April. Show your work!

            Ans: 

a.      Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost

= $245,640 − $240,810 = $4,830 U

b.     Fixed portion of the predetermined overhead rate

= $240,810/6,900 machine-hours = $34.90 per machine-hour

Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours − Standard hours allowed)

= $34.90 × (6,900 − 7,200) = $10,470 F