How do I calculate the controllable overhead variance and the overhead volume variance from the following?
Boyne and Associates is a medium-sized company located near a large metropolitan area in the Midwest. The company manufactures cabinets of mahogany, oak, and other fine woods for use in expensive homes, restaurants, and hotels. Although some of the work is custom, many of the cabinets are a standard size.
One Such non-custom model is called Luxury Base Frame. Normal production is 1,000 units. Each unit has a direct labor hour standard of 5 hours. Overhead is applied to production based on standard direct labor hours. During the most recent month, only 900 units were produced; 4,500 direct labor hours were allowed for standard production, but only 4,000 hours were used. Standard and actual overhead costs were as follows:
(1,000 units) (900 units)
Indirect materials 12,000 12,300
Indirect Labor 48,000 51,000
(Fixed) Manufacturing supervisor's salaries 22,000 22,000
(Fixed) Manufacturing office employees salaries 13,000 11,500
(Fixed) Engineering costs 26,000 25,000
Computer costs 10,000 10,000
Electricity 2,500 2,500
(Fixed) Manufacturing building depreciation 8,000 8,000
(Fixed) Machinery depreciation 3,000 3,000
(Fixed) Trucks and forklift depreciation 1,500 1,500
Small tools 700 1,400
(Fixed) Insurance 500 500
(Fixed) Property taxes 300 300
Total 147,500 149,000
Calculate the controllable overhead variance and the overhead volume variance.© BrainMass Inc. brainmass.com March 4, 2021, 7:38 pm ad1c9bdddf
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