Reference no: EM133114082

Question - Fresh-Cut processes bags of frozen organic vegetables sold at specialty grocery stores. Fresh-Cut allocates manufacturing overhead based on direct labour hours. Fresh-Cut actually processed 180,000 cases of frozen organic vegetables during the year and incurred $840,000 of manufacturing overhead. Of this? amount, $610,000 was fixed.

Standard variable overhead rate $5

Standard fixed overhead rate $15

Standard total overhead rate $20

Amount of cases processed 200,000

Standard fixed overhead $750,000

Direct labour standard for each case 0.25 hr.

Required -

1. What is the flexible budget (for the actual output) for variable overhead? For fixed overhead? For total overhead?

2. How much overhead would have been allocated to production?

3. Use your answer from Requirement 1 to determine the overhead flexible budget variance. What does this tell managers?

4. Use your answer from Requirements 1 and 2 to determine the production volume variance. What does this tell managers?

5. What is the total overhead variance?