# Rexford Components shows the following overhead information for the current period. Required What...

## Question:

Rexford Components shows the following overhead information for the current period.
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Required:
What are the variable overhead spending variance (also known as the price variance) and efficiency variance and fixed overhead spending variance?

Actual overhead incurred | $107,740, 3/4 of which is variable |

Budgeted fixed overhead | $ 22,531 |

Standard variable overhead rate per direct labor0hour | $32 |

Standard hours allowed for actual production | 2,900 hours |

Actual labor0hours used | 2,550 hours |

## Variance analysis:

Variance analysis is a process of management accounting which supports the managers in making informed decisions using the analysis of variances which are the differences between the budgeted revenues and expenses and actual results of operations.

## Answer and Explanation: 1

Below are the required calculations:

Calculation of variable overhead Rate variance | ||||
---|---|---|---|---|

Actual hours worked (A) | Actual overhead rate (I) | Standard overhead rate (II) | Variable overhead rate variance (A)*(I-II) | |

2,550.00 | $31.69 | $32.00 | ($795.00) | favorable |

Calculation of Actual overhead rate | ||||

Actual variable overhead cost | $80,805.00 | |||

Actual hours worked | 2,550.00 | |||

Actual overhead rate | $31.69 | |||

Calculation of variable overhead efficiency variance | ||||

Standard overhead rate (A) | Actual hours (I) | Standard hours (II) | Variable overhead efficiency variance (A)*(I-II) | |

$32.00 | 2,550.00 | 2,900.00 | ($11,200.00) | favorable |

Fixed overhead spending variance | ||||
---|---|---|---|---|

Actual fixed overhead (I) | Budgeted fixed overhead (II) | Fixed overhead spending variance (I-II) | ||

$26,935.00 | $22,531.00 | $4,404.00 | unfavorable | |

Fixed overhead efficiency variance | ||||

Fixed overhead rate (A) | Actual Hours (I) | Standard hours (II) | Fixed overhead efficiency variance (A)*(I-II) | |

$7.77 | 2550 | 2900 | ($2,719.26) | favorable |

Calculation of fixed overhead rate | ||||

Budgeted fixed overhead (a) | $22,531.00 | |||

no. of standard hours allowed (b) | 2900 | |||

Fixed overhead rate (a)/(b) | $7.77 |

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Cost Variance: Definition, Formula & Analysis

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Chapter 22 / Lesson 25Define what cost variance is. Learn the cost variance formula and how to perform a cost variance analysis. Discover material and labor cost variance analysis.

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