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Calculating overhead variances for SooTech Company

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.
Instructions
a. Compute the total, fixed, and variable predetermined manufacturing overhead
rates.
b. Compute the total, controllable, and volume overhead variances.

Excel Format:

#6

(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.

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

$2.19