The condensed flexible budget of the Texas Company for the year is given as $160,000 + $1.25/direct labor hour. The company produces a single product that requires 2.5 direct labor-hours to complete.
Assume that the company chooses 100,000 direct labor-hours as the denominator level of activity, but actually worked 96,000 hours during the year producing 37,000 units.
Actual overhead costs for the year are:
$\begin{array}{lrr}
\text { Variable costs } &\$124,800\
\text { Fixed costs} &\underline{158,800}\
\text { Total overhead costs}&\underline{\$283,600}
\end{array}$

Required:
(Be sure to indicate whether the variances are favorable or unfavorable.)
a. Compute the variable overhead price variance and the variable overhead efficiency variance.
b. Compute the fixed overhead spending (budget) variance and the production volume variance.

Question

The condensed flexible budget of the Texas Company for the year is given as $160,000 + $1.25/direct labor hour. The company produces a single product that requires 2.5 direct labor-hours to complete.
Assume that the company chooses 100,000 direct labor-hours as the denominator level of activity, but actually worked 96,000 hours during the year producing 37,000 units.
Actual overhead costs for the year are:
 $\begin{array}{lrr}
  \text { Variable costs } &\$124,800\
 \text {  Fixed costs} &\underline{158,800}\
 \text { Total overhead costs}&\underline{\$283,600}
\end{array}$
 
Required:
(Be sure to indicate whether the variances are favorable or unfavorable.)
a. Compute the variable overhead price variance and the variable overhead efficiency variance.
b. Compute the fixed overhead spending (budget) variance and the production volume variance.

Quizplus · Accepted Answer

The Answer of The condensed flexible budget of the Texas Company for the year is given as $160,000 + $1.25/direct labor hour. The company produces a single product that requires 2.5 direct labor-hours to complete.
Assume that the company chooses 100,000 direct labor-hours as the denominator level of activity, but actually worked 96,000 hours during the year producing 37,000 units.
Actual overhead costs for the year are:
 $\begin{array}{lrr}
  \text { Variable costs } &\$124,800\
 \text {  Fixed costs} &\underline{158,800}\
 \text { Total overhead costs}&\underline{\$283,600}
\end{array}$
 
Required:
(Be sure to indicate whether the variances are favorable or unfavorable.)
a. Compute the variable overhead price variance and the variable overhead efficiency variance.
b. Compute the fixed overhead spending (budget) variance and the production volume variance.

The Condensed Flexible Budget of the Texas Company for the Year