Learning Materials
Features
Discover
Chapter 23: Q14RQ (page 1305)
Question: List the variable overhead variances, and briefly describe each
Answer
The variable overhead variances can be in the form of variable overhead cost varianceand variable overhead efficiency variance.
Over 30 million students worldwide already upgrade their learning with 91影视!
All the tools & learning materials you need for study success - in one app.
Get started for free
Drew Castello, general manager of Sunflower Manufacturing, was frustrated. He wanted the budgeted results, and his staff was not getting them to him fast enough. Drew decided to pay a visit to the accounting office, where Jeff Hollingsworth was supposed to be working on the reports. Jeff had recently been hired to update the accounting system and speed up the reporting process.
鈥淲hat鈥檚 taking so long?鈥� Drew asked. 鈥淲hen am I going to get the variance reports?鈥� Jeff sighed and attempted to explain the problem. 鈥淪ome of the variances appear to be way off. We either have a serious problem in production, or there is an error in the spreadsheet. I want to recheck the spreadsheet before I distribute the report.鈥� Drew pulled up a chair, and the two men went through the spreadsheet together. The formulas in the spreadsheet were correct and showed a large unfavorable direct labor efficiency variance. It was time for Drew and Jeff to do some investigating.
After looking at the time records, Jeff pointed out that it was unusual that every employee in the production area recorded exactly eight hours each day in direct labor. Did they not take breaks? Was no one ever five minutes late getting back from lunch? What about clean颅up time between jobs or at the end of the day?
Drew began to observe the production laborers and noticed several disturbing items. One employee was routinely late for work, but his time card always showed him clocked in on time. Another employee took 10颅 to 15颅minute breaks every hour, averaging about 1 hours each day, but still reported eight hours of direct labor each day. Yet another employee often took an extra 30 minutes for lunch, but his time card showed him clocked in on time. No one in the production area ever reported any 鈥渄own time鈥� when they were not working on a specific job, even though they all took breaks and completed other tasks such as doing clean颅up and attending department meetings.
Requirements
1. How might the observed behaviors cause an unfavorable direct labor efficiency variance?
2. How might an employee鈥檚 time card show the employee on the job and working when the team member was not present?
3. Why would the employees鈥� activities be considered fraudulent?
List the eight product variances and the manager most likely responsible for each.
Question:How is the fixed overhead volume variance different from the other variances?
Computing overhead variances
Refer to the Morgan, Inc. data in Short Exercise S23颅9. Last month, Morgan reported the following actual results: actual variable overhead, \(10,800; actual fixed overhead, \)2,770; actual production of 7,000 units at 0.20 direct labor hours per unit. The standard direct labor time is 0.25 direct labor hours per unit (1,300 static direct labor hours / 5,200 static units).
Requirements
1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
2. Explain why the variances are favorable or unfavorable.
Understanding variance relationships
Complete the table below for the missing variances.
Total Flexible Budget Product Cost Variance (a) |
Total direct material variance (b) | Total direct labor variance (c) | Total Manufacturing Overhead Variance (d) |
Direct material cost variance | Direct material efficiency variance | Direct Labor Cost Variance | Direct Labor Efficiency Variance | Total Variable Overhead Variance | Total fixed overhead variance |
\(310F | \)165U | \(160U | \)415F | (e) | (f) |
Variable Overhead Cost Variance | Variable Overhead Efficiency Variance | Fixed Overhead Cost Variance | ||||
\(525U | \)575F | $50F |
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Flashcards 
91影视 AI 
Notes 
Study Plans 
Study Sets 
Find a degree 
Magazine