question archive Alden Company uses a three-variance analysis for factory overhead variances

Alden Company uses a three-variance analysis for factory overhead variances

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Alden Company uses a three-variance analysis for factory overhead variances. Practical capacity is defined as 32 setups and 32,000 machine hours to manufacture 6,400 units for the year. Selected data for 2022 follow:

 

Budgeted fixed factory overhead:      
Setup cost $ 89,600    
Other 98,000 $ 187,600  
Total factory overhead cost incurred   $ 488,000  
Variable factory overhead rate:      
Per setup   $ 750  
Per machine hour   $ 8.00  
Total standard machine hours allowed for the units manufactured   27,000 hours
Machine hours actually worked   31,000 hours
Actual total number of setups   28  
Actual number of units produced during the year   5,400  
Standard number of setups for units produced during the year   27  

 

Required:

1. Compute (a) the total overhead spending variance, (b) the overhead efficiency variance, and (c) the total overhead flexible budget variance for 2022. Label each variance as favorable (F) or unfavorable (U).

2. Assume that the company includes all setup costs as variable factory overhead. The budgeted total fixed overhead, therefore, is $98,000, and the standard variable overhead rate per setup is $3,550. What are (a) the total overhead spending variance, (b) the overhead efficiency variance, and (c) the total overhead flexible budget variance for the year? Label each variance as favorable (F) or unfavorable (U).

3. Assume that the company uses only machine hours as the activity measure to apply both variable and fixed overhead, and that it includes all setup costs as variable factory overhead. What are (a) the Total Overhead Spending Variance, (b) the Overhead Efficiency Variance, and (c) the total Overhead Flexible Budget Variance for the year? Indicate whether each variance is favorable (F) or unfavorable (U).

PLEASE SHOW ALL WORK AND STEPS. THANK YOU

pur-new-sol

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