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Weller Company: Predetermined Overhead Rates

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Please see attached problem for properly formatted charts.

Weller Company's flexible budget for manufacturing overhead (in condensed form) follows:

Overhead Costs Cost formula Machine hours
(per machine hour) 8,000 9,000 10,000

Variable cost $1.05 $8,400 $9,450 $10,500
Fixed cost 24,800 24,800 24,800
Total overhead cost $32,200 $34,250 $35,300

The following information is available for a recent period:
a. The denominator activity of 8,000 machine-hours was chosen to compute the predetermined overhead rate.
b. At the 8,000 standard machine hours level of activity the company should produce 3,200 units of product.
c. The company's actual operating results were as follows:

Number of units produced: 3,500
Actual machine hours: 8,500
Actual variable overhead costs: $9,860
Actual fixed overhead costs: $25,100

1. Compute the predetermined overhead rate and break it down into variable and fixed cost elements?

2. What were the standard hours allowed for the year's actual output?

3. Compute the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances.

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Solution Summary

This solution calculates the predetermined overhead rates and identifies the variable and fixed cost elements. It also finds spending and efficiency variances.

Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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