Compute the following for march flexible budget for

Question

Factory Overhead Flexible Budget and Variance Analyses Lopez & Co. uses flexible budgets for cost control. During March, Lopez spent 2,850 machine hours to produce 10,800 units and incurred $13,000 in total factory overhead, of which $4,500 was for fixed factory overhead.

The master budget for the year called for production of 150,000 units using 37,500 machine hours and a total factory overhead of $180,000. The total fixed factory overhead in the annual budget was $60,000.

Required: Compute the following for March:

1. Flexible budget for total overhead based on output (i.e., units produced).

2. Factory overhead flexible-budget variance.

3. All variances, including:

a. Variable and fixed overhead spending variances.

b. Variable overhead efficiency variance.

c. Fixed overhead production-volume variance.

4. Reconcile your answers in Requirements 2 and 3 above.

5. What recommendation do you have regarding the manner in which the fixed-overhead application rate is determined?

Answer 1

Make sure to read the question illustrated below properly and on the basis of the information provided, answer with proper reasoning. Lopez & Co. employs flexible budgets for cost control. Throughout March, Lopez spent 2,850 machine hours to generate 10,800 units and incurred $13,000 in total factory overhead, of which $4,500 was for fixed factory overhead. The master budget for the year called for the production of 150,000 units employing 37,500 machine hours and a net factory overhead of $180,000. The net fixed factory overhead in the yearly budget was $60,000. Calculate the given for March: 1) Flexible budget for net overhead based on output (that is, units generated). 2) Factory overhead flexible-budget variance. 3) All variances, comprising: a) Variable and fixed overhead spending variances. b) Variable overhead efficiency variance. c) Fixed overhead production-volume variance. 4) Reconcile your responses in requisite 2 and 3 above.