Crystal Glassware Company: Variances
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Crystal Glassware Company has the following standards and flexible-budget data.
Standard variable-overhead rate.............. $6.00 per direct-labor hour
Standard quantity of direct labor............ 2 hours per unit of output
Budgeted fixed overhead...................... $100,000
Budgeted output.............................. 25,000
Actual results for April are follows:
Actual output................................ 20,000 units
Actual variable overhead..................... $320,000
Actual fixed overhead........................ $97,000
Actual direct labor.......................... 50,000 hours
Use the variance formulas to compute the following variances. Indicate whether each variance is favorable or unfavorable, where appropriate.
1. Variable-overhead spending variance.
2. Variable-overhead efficiency variance.
3. Fixed-overhead budget variance
4. Fixed-overhead volume variance.
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Solution Summary
This response analyzes the variances of Crystal Glassware Company.
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(1)
Variable overhead spending variance = actual variable overhead costs - (standard variable-overhead rate * actual hours of labor used) = $320,000 - $6.00 per direct-labor hour * 50,000 hours = $20,000, which is unfavorable since the actual overhead costs exceeds the budgeted amount.
(2)
Variable Overhead Efficiency Variance = (actual labor-hours - standard labor-hours allowed for actual ...
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