Question:This Try It! continues the previous Try It! for Tipton Company, a shirt manufacturer. During June, Tipton made 1,200 shirts but had budgeted production at 1,400 shirts. Tipton gathered the following additional data:

Variable overhead cost standard \(0.50 per DLHr

Direct labor efficiency standard 2.00 DLHr per shirt

Actual amount of direct labor hours 2,520 DLHr

Actual cost of variable overhead \)1,512

Fixed overhead cost standard \(0.25 per DLHr

Budgeted fixed overhead \)700

Actual cost of fixed overhead $750

Calculate the following variances:

13. Variable overhead cost variance

14. Variable overhead efficiency variance

15. Total variable overhead variance

16. Fixed overhead cost variance

17. Fixed overhead volume variance

18. Total fixed overhead variance

Step by step solution

01

Computation of variable overhead cost variance

$$\begin{gathered} \mathbf{A}\mathbf{ctualVariablecostperdirectlaborhour}\mathbf{=}\frac{\mathbf{Actualcostofvariableoverhead}}{\mathbf{Actualamountofdirectlaborhours}} \\ \mathbf{=}\frac{\mathbf{1}\mathbf{,}\mathbf{512}}{\mathbf{2}\mathbf{,}\mathbf{520}} \\ \mathbf{=}\mathbf{\$}\mathbf{0}\mathbf{.}\mathbf{60} \\ \mathbf{VariableOverheadCostVariance}\mathbf{=}\left(\mathbf{AC}\mathbf{-}\mathbf{SC}\right)\mathbf{\times }\mathbf{AQ} \\ \mathbf{=}\left(\mathbf{0}\mathbf{.}\mathbf{60}\mathbf{-}\mathbf{0}\mathbf{.}\mathbf{50}\right)\mathbf{\times }\mathbf{2}\mathbf{,}\mathbf{520} \\ \mathbf{=}\mathbf{\$}\mathbf{252}\mathbf{U} \end{gathered}$$

02

Computation of variable overhead efficiency variance

$$\begin{gathered} \mathbf{StandardQuantity}\mathbf{=}\mathbf{DirectLaborEfficiencystandard}\mathbf{\times }\mathbf{Numberofunitsproduced} \\ \mathbf{=}\mathbf{2}\mathbf{\times }\mathbf{1}\mathbf{,}\mathbf{200} \\ \mathbf{=}\mathbf{2}\mathbf{,}\mathbf{400} \\ \mathbf{VariableOverheadEfficiencyVariance}\mathbf{=}\left(\mathbf{AQ}\mathbf{-}\mathbf{SQ}\right)\mathbf{\times }\mathbf{SC} \\ \mathbf{=}\left(\mathbf{2}\mathbf{,}\mathbf{520}\mathbf{-}\left(1,200\times 2\right)\right)\mathbf{\times }\mathbf{0}\mathbf{.}\mathbf{50} \\ \mathbf{=}\mathbf{\$}\mathbf{60}\mathbf{U} \end{gathered}$$

03

Computation of total variable overhead variance

$$\begin{gathered} \mathbf{Totalvariableoverheadvariance}\mathbf{=}\left(\mathbf{VariableoverheadcostVariance} \\ \mathbf{+}\mathbf{Variableoverheadefficiencyvariance} \\ \right) \\ \mathbf{=}\mathbf{252}\mathbf{U}\mathbf{+}\mathbf{60}\mathbf{U} \\ \mathbf{=}\mathbf{\$}\mathbf{312}\mathbf{U} \end{gathered}$$

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