Potter Company provided the following information:
Standard variable overhead rate (SVOR) per direct labor hour………………$5.00
Actual variable overhead costs:
Inspection…………………………………………………………………$162,000
Power……………………………………………………………………..$220,600
Actual direct labor hours worked (AH) ……………………………………77,000
Actual production in units…………………………………………………..25,000
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Standard hours (SH) allowed for actual units produced……………………75,000
VOH:
Inspection…………………………………………………………3 hours @ $2.00
Power………………………………………………………………3 hours @ $3.00
Required:
Prepare a performance report that shows the variances for each variable overhead item (inspection and power).
SOLUTION
| | | | | | Budget for | Budget for | Budget for | Budget for | | Budget for | Budget for | Budget for | Budget for |
|---|
| Overhead | | Cost | | Actual | | Actual | Spending | Spending | Spending | | At Standard | | Efficiency | Efficiency |
| Cost Item | | Formula | | Cost | | Hours | Variance | Variance | Variance | | Hours | | Variance | |
| Inspection……… | | $2.00 | | $162,000 | | $154,000 | | $ 8,000 | U | U | $150,000 | | $ 4,000 | U |
| Power…………… | | 3.00 | | 220,600 | | 231,000 | | (10,400) | F | | 225,000 | | 6,000 | U |
| Total……………… | | $5.00 | | $382,600 | | $385,000 | | $ (2,400) | F | | $375,000 | | $10,000 | U |