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


Rexford Components shows the following overhead information for the current period. [{HtmlTable
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 production2,900 hours
Actual labor0hours used2,550 hours
}] Required: What are the variable overhead spending variance (also known as the price variance) and efficiency variance and fixed overhead spending variance?

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    

Learn more about this topic:

Cost Variance: Definition, Formula & Analysis


Chapter 22 / Lesson 25

Define 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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