# 2024 – Question 1 20 marks Unit 7 Questions When analyzing the total variable overhead cost variance into both spending and efficiency

Managerial accounting 7 – 2024

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2024 – Question 1 20 marks Unit 7 Questions When analyzing the total variable overhead cost variance into both spending and efficiency.

Question 1: (20 marks) Unit 7 Questions When analyzing the total variable overhead cost variance into both spending and efficiency variances, it is often assumed that direct labour hours is the sole cost driver. Required: 1) Explain if direct labour costs could ever be a better cost driver of variable overhead costs than direct labour hours.

2) How is the standard variable overhead rate different from the standard labour rate in variance analysis? Please explain.

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Question 2: (14 marks) CLAW Corporation is a manufacturer of industrial equipment, located in Toronto, Ontario. CLAW has a standard costing system based on direct labour hours (DLHs) as the measure of activity.

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Question 3: (30 marks) For The Win (FTW) Corporation uses a standard costing system in the creation of awards and trophies. The Manufacturing overhead costs are applied to products on the basis of machine time. Required: 1) Unfortunately, due to accounting glitches in FTW’s software, several numbers and labels have been omitted from the analysis of fixed overhead below.

3 Actual Fixed Overhead Cost Flexible Budget Overhead Cost Fixed Overhead Cost Applied to Work in Process (a) (b) 302,100 MH x \$1.08 = (c) Budget variance, \$1,880 U (d) Total variance, \$388 F (e) 2) Next, assume that 6 minutes of machine time is standard per unit of production. How manyunits were actually produced in the situation above? 3) Once again, assume that 6 minutes of machine time is standard per unit of production.

## Time period 400 units

Question 4: (36 marks) Orville Company’s standard and actual costs per unit are provided below for the most recent period. During this time period 400 units were actually produced. Standard Actual Materials: Standard: 2 metres at \$1.50 per m. \$3.00 Actual: 2.1 metres at \$1.60 per m. \$3.36 Direct labour: Standard: 1.

5 hrs. at \$6.00 per hr. 9.00 Actual: 1.4 hrs. at \$6.50 per hr. 9.10 Variable overhead: Standard: 1.5 hrs. at \$3.40 per hr. 5.10 Actual: 1.4 hrs. at \$3.10 per hr. 4.34 Total unit cost \$17.19 \$16.80 For simplicity, assume there was no inventory of materials at the beginning or end of the period.

Required: 5 Given the information above, compute the following variances. Also indicate if the variances are favorable or unfavorable.

1) Materials price variance

2) Materials quantity variance

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