## Description

the following data are the actual results for Marvelous Marshmallow Company for October.

Actual output ………………………………………………………………………………………………………………… 9,000 cases

Actual variable overhead …………………………………………………………………………………………………. $405,000

Actual fixed overhead ……………………………………………………………………………………………………… $122,000

Actual machine time ………………………………………………………………………………………………………. 40,500 machine hours

Standard cost and budget information for Marvelous Marshmallow Company follows:

Standard variable-overhead rate ………………………………………………………………………… $9.00 per machine hour

Standard quantity of machine hours ……………………………………………………………………. 4 hours per case of marshmallows

Budgeted fixed overhead ………………………………………………………………………………….. $120,000 per month

Budgeted output …………………………………………………………………………………………….. 10,000 cases per month

Required:

1. Use any of the methods explained in the chapter to compute the following variances. Indicate

whether each variance is favorable or unfavorable, where appropriate.

a. Variable-overhead spending variance.

b. Variable-overhead efficiency variance.

c. Fixed-overhead budget variance.

d. Fixed-overhead volume variance.

2. Build a spreadsheet: Construct an Excel spreadsheet to solve the preceding requirement. Show

how the solution will change if the following information changes: actual output was 9,100 cases,

and actual variable overhead was $395,000.

Actual output ………………………………………………………………………………………………………………… 9,000 cases

Actual variable overhead …………………………………………………………………………………………………. $405,000

Actual fixed overhead ……………………………………………………………………………………………………… $122,000

Actual machine time ………………………………………………………………………………………………………. 40,500 machine hours

Standard cost and budget information for Marvelous Marshmallow Company follows:

Standard variable-overhead rate ………………………………………………………………………… $9.00 per machine hour

Standard quantity of machine hours ……………………………………………………………………. 4 hours per case of marshmallows

Budgeted fixed overhead ………………………………………………………………………………….. $120,000 per month

Budgeted output …………………………………………………………………………………………….. 10,000 cases per month

Required:

1. Use any of the methods explained in the chapter to compute the following variances. Indicate

whether each variance is favorable or unfavorable, where appropriate.

a. Variable-overhead spending variance.

b. Variable-overhead efficiency variance.

c. Fixed-overhead budget variance.

d. Fixed-overhead volume variance.

2. Build a spreadsheet: Construct an Excel spreadsheet to solve the preceding requirement. Show

how the solution will change if the following information changes: actual output was 9,100 cases,

and actual variable overhead was $395,000.

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