Edney Company employs a standard cost system for product costing. The per-unit standard cost of its product is:
Raw materials $ 14.00
Direct labor (2 direct labor hours x $8.00 per hour) 16.00
Manufacturing overhead (2 direct labor hours x $13.80 per hour) 27.60
Total standard cost per unit $ 57.60
The manufacturing overhead rate is based on a normal capacity level of 600,000 direct labor hours. The firm has the following annual
manufacturing overhead budget:
Variable $ 4,440,000
Fixed 3,840,000
$ 8,280,000
Edney incurred $436,150 in direct labor cost for 54,900 direct labor hours to manufacture 26,000 units in November. Other costs
incurred in November include $344,000 for fixed manufacturing overhead and $378,000 for variable manufacturing overhead.
Required:
1. Determine each of the following for November. [Note: Indicate whether each variance is favorable (F) or unfavorable (U).]
a. The variable overhead rate (spending) variance.
b. The variable overhead efficiency variance.
c. The fixed overhead budget (spending) variance.
d. The fixed overhead volume variance.
e. The total amount of under- or overapplied manufacturing overhead (i.e., the total manufacturing overhead cost variance for the
period).
1a. The variable overhead rate (spending) variance. $ (28,260) Favorable
1b. The variable overhead efficiency variance. $ 21,460 Unfavorable
1c. The fixed overhead budget (spending) variance.
1d. The fixed overhead volume variance.
