Variable overhead costs:
Supplies $4 per yard
Machine maintenance $2 per yard
Chemicals $6 per yard
Fixed overhead costs:
Salaries and wages $2300 per month
Machine maintenance $800 per month
Utilities $400 per month
Rent $1100 per month
In June, the following actual costs were incurred for 83 yards:
Machine maintenance $180
Salaries and wages $2500
Construct a flexible budget performance report using the data provided. Show computations.
Banner Inc. bases its variable overhead performance report on the actual direct labor hours of the period. Data concerning the most recent year that ended on December 31 are as follows:
Budgeted direct labor hours 12000
Actual direct labor hours 13500
Standard direct labor hours allowed 13000
Cost formula (per direct labor hour):
Indirect labor $0.85
Actual costs incurred:
Indirect labor $11600
Management would like to compute both the spending and efficiency variances for variable overhead in the company's variable overhead performance report. Prepare a variable overhead performance report with both the variable overhead spending and efficiency variances. Show computations and details.
The solution explains how to prepare a flexible budget performance report and calculate spending and efficiency variances.