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    Calculating overhead variances for SooTech Company

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    Exercise 8E-6

    E8-6 The following information was taken from the annual manufacturing overhead
    cost budget of SooTech Company.

    Variable manufacturing overhead costs $33,000
    Fixed manufacturing overhead costs 19,800
    Normal production level in hours 16,500
    Normal production level in units 4,125

    During the year, 4,000 units were produced, 16,100 hours were worked, and the
    actual manufacturing overhead was $54,000. Actual fixed manufacturing overhead
    costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied
    on the basis of direct labor hours.
    a. Compute the total, fixed, and variable predetermined manufacturing overhead
    b. Compute the total, controllable, and volume overhead variances.

    Excel Format:


    (a)Item Amount Hours Rate

    Variable overhead $xxx 16,500 $x.00
    Fixed overhead xxx 16,500 x.xo
    Total overhead 52,800 16,500 $3.20

    (b) Total overhead variance:
    Actual overhead $54,000 - overhead applied $51,200 (16,000* X $3.20)
    = $2,800 U.
    *($16,500 à· 4,125) X 4,000 units

    Overhead controllable variance:
    Actual overhead $54,000 - overhead budgeted $51,800 [(16,000 X $2)
    + $19,800] = $2,200 U.

    Overhead volume variance:
    Overhead budgeted $51,800 - overhead applied $51,200 = $600 U.

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    Solution Preview

    (a) Items hours and rate is computed below

    Item Amount Hours ...

    Solution Summary

    The solution explains how to calculate the overhead variances for SooTech Company