Reference no: EM131800841

Problem 1: Calculating factory overhead: two variances

Dakota Manufacturing Inc. normally produces 10,000 units of product A each month. Each unit requires 4 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are $10 and $5 per unit, respectively.

Cost and production data for June follow:

Production for the month.........................................11,000 units
Direct labor hours used ...........................................42,000 hours
Factory overhead incurred for:
Variable costs ...................................................$48,000
Fixed costs ......................................................$103,000

a.Calculate the flexible-budget variance.
b.Calculate the production-volume variance.
c.Was the total factory overhead under- or over applied? Bywhat amount?

Problem 2: Calculating factory overhead: two variances

Montana Manufacturing Co. normally produces 10,000 units of product X each month. Each unit requires 2 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are $5 and $3 per unit, respectively.

Cost and production data for May follow

Production for the month.........................................9,000 units
Direct labor hours used ...........................................18,500 hours
Factory overhead incurred for:
Variable costs ...................................................$28,500
Fixed costs ......................................................$52,000a

a.Calculate the flexible-budget variance
b.Calculate the production-volume variance.
c.Was the total factory overhead under- or over applied? By what amount?