# Variance Spending, Efficiency, Budget, and Volume

PROBLEM 2

The following data are the actual results for Marvelous Marshmallow Company for October:

Actual output 9,000 cases

Actual variable overhead $ 405,000

Actual fixed overhead $ 122,000

Actual machine time 40,500 per machine hours

Standard cost and budget information for Marvelous Marshmallow Company follows:

Standard variable-overhead rate $ 9.00 machine hour

Standard quantity of machine hours 4 hours per case of marshmallows

Budgeted fixed overhead $ 120,000 per month

Budgeted output 10,000 cases per month

REQUIRED:

1. Compute the following variances. Indicate whether each variance is favorable or unfavorable, where appropriate.

a) Variable-overhead spending variance.

b) Variable-overhead efficiency variance.

c) Fixed-overhead budget variance.

d) Fixed-overhead volume variance.

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#### Solution Preview

Problem 2

Machine hours

Standard = $9/hour

SR = 9.00

4 hours per case = $36 per case

10,000 cases = $360,000 budgeted variable costs

Actual = 9,000 cases

Actual overhead = $405,000 - 4 hours per case = 405000/4 = $101,250 / 9000 cases = $11.25 per machine hour

AR = $11.25

a) SR = Standard variable ...

#### Solution Summary

The expert examines variance spending, efficiency, budgets and volumes.