Featured Exercise
Franklin Company provides the following information about its manufacturing operations for the month just ended:
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Actual machine-hours used
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22,000
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Budgeted total overhead
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$900,000
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Actual variable overhead incurred
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$352,000
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Actual fixed overhead incurred
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$575,000
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Budgeted production is 200,000 units of output and actual production is 198,000 units of output. One-tenth of a machine-hour is budgeted per unit of output. The budgeted fixed overhead cost rate is $30 per machine-hour. The company uses 4-variance analysis for overhead.
a. Using the columnar format below, compute the variable overhead spending and efficiency variances. Indicate whether each variance is favorable or unfavorable. Use F for favorable variances and U for unfavorable variances.
b. Using the columnar format below, compute the fixed overhead spending and production-volume variances. Indicate whether each variance is favorable or unfavorable. Use F for favorable variances and U for unfavorable variances.
c. Is total overhead underallocated or overallocated? By what amount?