Reference no: EM132841393

Question - Flip Flops R Us Inc. manufactures rubber flip flops in its large factory. The company budgeted to manufacture 18,000,000 pairs of Flip Flops in the coming year. Production was expected to be evenly spread out over the 12 month period. To accomplish this goal it has determined that it will require $3,000,000 in Variable Overhead costs and $12,000,000 in Fixed Overhead Costs. The Fixed OH Costs are incurred evenly over the year. The Factory is very machine intensive and it has determined the best way to apply Overhead to its Inventory production is by using Machine Hours. It is expected that it will take 6,000,000 Machine Hours to attain the required budgeted production.

During the month of June the company manufactured 2,800,000 individual Flip Flops. The actual Machine hours utilized in the month was 520,000. The cost of the actual Variable Overhead cost incurred was $470,000 and the actual cost of Fixed Overhead was $610,000.

Required -

i) Calculate the Variable Overhead Spending and Efficiency Variances.

ii) Calculate the Fixed Overhead Budget and Volume Variances.

iii) What does the Volume Variance tell you? And was the Fixed Overhead Under or Over Applied?