Cedar Key Company produces handmade clamming buckets and sells them to distributors along the gulf coast of Florida.
See the attached file.
The company incurred $9,400 of actual overhead cost ($8,000 variable, $1400 fixed) in May. Budgeted standard overhead costs for May were $4 of variable overhead costs per direct labor hour and $1500 of fixed overhead costs. Normal capacity was set at 2,000 direct labor hours per month. In May, the company produced 10,100 clamming buckets by working 1900 direct labor hours. The time standard is .2 direct labor hour per clamming bucket.
1. Compute the variable overhead spending and efficiency variances.
2. Compute the overhead budget and volumes variances for May.
The solution examines the overhead variances for Cedar Key Company. The overhead budget and volumes variances for May is computed.