Explore BrainMass
Share

# Compute Overhead Application Rate and Variances

55. Corinne's Country Rockers uses flexible budgeting. The company's budget for variable overhead is \$24,000 and for fixed overhead is \$15,000. When Corinne's analyzes this overhead using activity-based costing, the budgeted overhead of \$39,000 is traced to six activities: materials handling, machinery setup, assembly, finishing, maintenance, and inspections. The costs associated with each activity and their respective cost drivers are as follows:

Activity Flexible Budget Amount Cost Driver Budget Volume
Materials handling \$6,000 Number of moves 200
Setting up machinery 4,000 Number of setups 80
Assembly 14,000 Number of labor hours 6,000
Finishing 4,800 Number of labor hours 2,000
Maintenance 4,800 Number of maintenance hours 160
Inspections 5,800 Number of inspection 2,400

The actual cost and total volume for each activity are as follows:

Activity Cost Volume
Materials handling \$7,400 205 moves
Setting up machinery 4,375 90 setups
Assembly 14,500 6,300 labor hours
Finishing 6,010 2,100 labor hours
Maintenance 5,700 150 maintenance hours
Inspections 5,900 2,440 inspections

Required

A. Compute the overhead application rate for each activity. Put your answer in the format of an activity-based costing flexible budget.
B. Using the actual volume and cost, compute the spending variance, the efficiency variance, and the total variance for each activity.

#### Solution Summary

The expert computes overhead application rates and variances.

\$2.19