90.2K

Verified Solution

Link Copied!

I cannot figure out the volume variance please help!!

Overhead Variance Analysis The Lubbock plant of Morril's Small Motor Division produces a major subassembly for a 6.0 horsepower motor for lawn mowers. The plant uses a standard costing system for production costing and control. The standard cost sheet for the subassembly follows: Direct materials (6.0 lbs. @ $5.00) $30.00 Direct labor (1.6 hrs. @ $12.00) 19.20 VOH (1.6 hrs. @ $10.00) 16.00 FOH (1.6 hrs. @ $6.00) 9.60 Standard unit cost $74.80 During the year, the Lubbock plant had the following actual production activity: (a) Production of motors totaled 50,000 units. (b) The company used 82,000 direct labor hours at a total cost of $1,066,000. (C) Actual fixed overhead totaled $556,000. (d) Actual variable overhead totaled $860,000. The Lubbock plant's practical activity is 60,000 units per year. Standard overhead rates are computed based on practical activity measured in standard direct labor hours. Required: 1. Compute the variable overhead spending and efficiency variances. Enter amounts as positive numbers and select Favorable or Unfavorable. Spending variance 40,000 Unfavorable Efficiency variance $ 20,000 Unfavorable 2a. CONCEPTUAL CONNECTION Compute the fixed overhead spending and volume variances. Enter amounts as positive numbers and select Favorable or Unfavorable. Spending variance 20,000 Favorable Volume variance Unfavorable b. Interpret the volume variance. What can be done to reduce this variance? Complete the paragraph below in response. The volume variance is a measure of unused capacity This cost is reduced as production increases. Thus, selling more goods is the key to reducing this capacity

Answer & Explanation Solved by verified expert

See Answer