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Final Exam Problem 3: Flexible Budgets and overhead Analysis

Flick Company uses a standard cost system in which manufacturing overhead is

applied to units of product on the basis of standard direct labor hours. The company’s

total budgeted variable and fixed manufacturing overhead costs at the denominator

level of activity are $20,000 for variable overhead and $30,000 for fixed overhead.

The predetermined overhead rate, including both fixed and variable components, is

$2.50 per direct labor hours. The standards call for two direct labor hours per unit of

output produced. Last year, the company produced 11,500 units of product and

worked 22,000 direct labor hours. Actual costs were $22,500 for variable overhead

and $31,000 for fixed overhead.

Required:

a. What is the denominator level of Activity?

b. What were the standard hours allowed for the output last year?

c. What was the variable overhead spending variance?

d. What was the variable overhead efficiency variance?

e. What was the fixed overhead budget variance?

f. What was the fixed overhead volume variance?

g. Complete the following Manufacturing Overhead T account for the period:

Manufacturing Overhead

Actual Overhead

Overhead Applied

Balance

Include the balance in the account either debit or credit and label each entry.