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E8-17 Calculating factory overhead: two variances
Dakota Manufacturing Inc. normally produces 10,000 units of product A each month. Each unit
requires 4 hours of direct labor, and factory overhead is applied on a direct labor hour basis.
Fixed costs and variable costs in factory overhead at the normal capacity are $10 and $5 per
unit, respectively.
Cost and production data for June follow:
Production for the month…………………………………..11,000 units
Direct labor hours used …………………………………….42,000 hours
Factory overhead incurred for:
Variable costs ……………………………………………$48,000
Fixed costs ………………………………………………$103,000
a.Calculate the flexible-budget variance.
b.Calculate the production-volume variance.
c.Was the total factory overhead under- or over applied? By what amount?
E8-16 Calculating factory overhead: two variances
Montana Manufacturing Co. normally produces 10,000 units of product X each month. Each
unit requires 2 hours of direct labor, and factory overhead is applied on a direct labor hour
basis. Fixed costs and variable costs in factory overhead at the normal capacity are $5 and $3
per unit, respectively.
Cost and production data for May follow
Production for the month…………………………………..9,000 units
Direct labor hours used …………………………………….18,500 hours
Factory overhead incurred for:
Variable costs ……………………………………………$28,500
Fixed costs ………………………………………………$52,000a
.Calculate the flexible-budget variance
.b.Calculate the production-volume variance.
c.Was the total factory overhead under- or over applied? By what amount?