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catrinacpa
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Posted: 02 Apr 2012 at 13:30 \| IP Logged

Can someone please assist me with this problem?

Actual:

Number of frames manuafactured: 19,000

Variable OH costs:$4,100

Fixed OH Cost: $22,000

Direct Labor Hours: 2100 hours

Budgeted:

Number of frams manuafactured: 20,000

Variable OH Costs: $2 per direct labor hour

Fixed OH Cost: $20,000. $1 per unit

Direct Labor Hours: 0.1 hour per frame

Question 1: What is the variable overhead efficiency variances?

Question 2: What is the production volume variances?

I am not understanding the problem. Please help

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austingolduk
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Posted: 02 Apr 2012 at 14:19 \| IP Logged

Hey, for question 1:
use this formula for V/O Efficiency variance:
{SH(boao) - AH} x SR}
where :
SH = standard hour = 0.1
boao = based on actual output = 19000
AH = actual hour = 2100
SR = standard variable rate. = $2
using inserting the figures become:
{0.1(19000) -2100} x $2 = 400(u). This is unfavorable variance because the organization used more hours than stipulated.

2. For production volume variance, the focus is on fixed cost.
the formula to use is:
{SH(boao) -BH} x SR
Where BH = budgeted hours = 20000 x.1 = 2000
SR = standard fixed rate = $1

Inserting the formula:
{0.1(19000) - 2000} x $1= 100(u)
This is unfavorable because the total standard hours is below the budgeted hours. Let me know is I got both questions right.

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