flexible budget overhead variance question

Cost Accounts 2062 views 2 replies

I had posted this question earlier. Since there was no response from anyone I am posting this thread again.

 

Please help

 

 

Ardmore Enterprises uses a standard cost system in its small appliance division. The standard cost of manufacturing one unit of Zeb is as follows.

 

Materials – 60 pounds at $1.50 per pond                                                      $90

Labor – 3 hours at $12 per hour                                                                      36

Factory overhead – 3 hours at $ 8 per hour                                                   24

Total standard cost per unit                                                                              $150

The budgeted variable factory overhead rate is $3 per labor hour, and the budgeted fixed factory overhead is $27,000 per month. During May, Ardmore produced 1,650 units of Zeb compared to a normal capacity of 1,800 units. The actual cost per unit was as follows.


Materials – 58 pounds at $1.65 per pond                                                      $95.7

Labor – 3.1 hours at $12 per hour                                                                   37.2

Factory overhead – $39930 per 1650 units                                                   24.20

Total standard cost per unit                                                                              $157.10


What is flexible budget overhead variance for May ?

 

Correct Answer is $1,920 favorable.

 

I am getting the answer 330 unfavourable arrived as under

 

Actual F. oh : 39930

Actual qty * std. rate = 1650*24 = 39600

Difference of above two = 330 unvavourable

 

Please anyone help me solve this problem to arrive at correct answer of 1920 favourable.

 

 

Replies (2)

Budgeted OH are not 39600

Bud OH are made up of fixed OH and variable OH

Fixed OH = 5*3*1800

Variable OH = 1650*3*3

Compare the sum of above two with actual OH, you'll get 1920

Dear Mr.Nishant,

 

Thank you very much for helping me out .

 

Anil.


CCI Pro

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