Chapter 21: Q9DQ (page 967)
Google monitors its fixed overhead. In an analysis of fixed overhead cost variances, what is the volume variance?
The differences in the actual cost obtained from the actual production is termed overhead volume variance.
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City Company’s fixed budget performance report for July follows. The \(647,500 budgeted total expenses include \)487,500 variable expenses and \(160,000 fixed expenses. Actual expenses include \)158,000 fixed expenses. Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. List fixed and variable expenses separately.
Fixed Budget Actual Results Variances
Sales (in units) 7,500 7,200
Sales (in dollars) \(750,000 \)737,000 \(13,000 U
Total expenses 647,500 641,000 6,500 F
Income from operations \)102,500 \(96,000 \)6,500 U
Refer to information in QS 21-14. Compute the overhead volume variance for November and classify it as favorable or unfavorable.
Presented below are terms preceded by letters a through j and a list of definitions 1 through 10. Enter the letter of the term with the definition, using the space preceding the definition.
| 1. The difference between actual and budgeted sales or cost caused by the difference between the actual price per unit and the budgeted price per unit. |
| 2. A planning budget based on a single predicted amount of sales or production volume; unsuitable for evaluations if the actual volume differs from the predicted volume. |
| 3. Preset costs for delivering a product, component, or service under normal conditions. |
| 4. A process of examining the differences between actual and budgeted sales or costs and describing them in terms of the amounts that resulted from price and quantity differences. |
| 5. The difference between the total budgeted overhead cost and the overhead cost that was allocated to products using the predetermined fixed overhead rate. |
| 6. A budget prepared based on predicted amounts of revenues and expenses corresponding to the actual level of output. |
| 7. The difference between actual and budgeted cost caused by the difference between the actual quantity and the budgeted quantity. |
| 8. The combination of both overhead spending variances (variable and fixed) and the variable overhead efficiency variance. |
| 9. A management process to focus on significant variances and give less attention to areas where performance is close to the standard. |
| 10. The difference between actual cost and standard cost, made up of a price variance and a quantity variance. |
After evaluating Null Company’s manufacturing process, management decides to establish standards of 3 hours of direct labor per unit of product and \(15 per hour for the labor rate. During October, the company uses 16,250 hours of direct labor at a \)247,000 total cost to produce 5,600 units of product. In November, the company uses 22,000 hours of direct labor at a $335,500 total cost to produce 6,000 units of product.
1. Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months. Classify each variance as favorable or unfavorable.
2. Interpret the October direct labor variances.
Business Solutions’s second-quarter 2018 fixed budget performance report for its computer furniture operations follows. The \(156,000 budgeted expenses include \)108,000 in variable expenses for desks and \(18,000 in variable expenses for chairs, as well as \)30,000 fixed expenses. The actual expenses include \(31,000 fixed expenses. Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. List fixed and variable expenses separately.
Fixed Budget | Actual Results | Variances | |
Desk sales (in units) | 144 | 150 | |
Chair sales (in units) | 72 | 80 | |
Desk sales | \)180,000 | \(186,000 | \)6,000 F |
Chair sales | 36,000 | 41,200 | 5,200 F |
Total expenses | 156,000 | 163,880 | 7,880 U |
Income from operations | \(60,000 | \)63,320 | $3,320 F |
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