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Chapter 23: Q16RQ (page 1305)
Question:How is the fixed overhead volume variance different from the other variances?
Answer
Thefixed overhead volume variance is different from other variances; first, it is not a flexible variance, and second, it is a volume variance
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Question:Mills, Inc. is a competitor of Murry, Inc. from Exercise E2318. Mills also uses a standard cost system and provides the following information:
Static budget variable overhead \( 1,200
Static budget fixed overhead \) 1,600
Static budget direct labor hours 800 hours
Static budget number of units 400 units
Standard direct labor hours 2 hours per unit
Mills allocates manufacturing overhead to production based on standard direct labor hours. Mills reported the following actual results for 2018: actual number of units produced, 1,000; actual variable overhead, \(4,000; actual fixed overhead, \)3,100; actual direct labor hours, 1,600.
Requirements
1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances.
2. Explain why the variances are favorable or unfavorable
Question:What is a standard cost system?
Question:Top managers of Marshall Industries predicted 2018 sales of 14,800 units of its product at a unit price of \(9.50. Actual sales for the year were 14,600 units at \)12.00 each. Variable costs were budgeted at \(2.00 per unit, and actual variable costs were \)2.10 per unit. Actual fixed costs of \(48,000 exceeded budgeted fixed costs by \)4,000.
Prepare Marshall’s flexible budget performance report. What variance contributed most to the year’s favorable results? What caused this variance?
Identifying the benefits of standard costs
Setting standards for a product may involve many employees of the company. Identify some of the employees who may be involved in setting the standard costs, and describe what their role might be in setting those standards.
00Question:Mason Fender is a competitor of Matthews Fender from Exercise E2319. Mason Fender also uses a standard cost system and provides the following information:
Static budget variable overhead \( 2,300
Static budget fixed overhead \) 23,000
Static budget direct labor hours 575 hours
Static budget number of units 23,000 units
Standard direct labor hours 0.025 hours per fender
Mason Fender allocates manufacturing overhead to production based on standard direct labor hours. Mason Fender reported the following actual results for 2018: actual number of fenders produced, 20,000; actual variable overhead, \(5,350; actual fixed overhead, \)26,000; actual direct labor hours, 460.
Requirements
1. Compute the overhead variances for the year: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
2. Explain why the variances are favorable or unfavorable.
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