Problem:
Shasta Company's flexible budget (in condensed form) for an expected activity level of 75,000 units of production based on 187,500 standard machine hours is provided below.
Variable overhead $843,750
Fixed Overhead $1,406,250
Total Overhead $2,250,000
During 1997 the company's actual operating results were
Number of units produced 72,500
Machine hours used 180,000
Variable costs incurred $826,500
Fixed costs incurred $1,395,000
Required:
1. Compute the variable, fixed and total predetermined overhead application rate for 1997
2. Compute the standard machine hours allowed for the actual production level achieved in 1997
3. Compute the variable overhead spending and efficiency variance for 1997
4. Compute the fixed overhead budget and volume variance for 1997