Question:
The information shown on the next page was taken from the annual manufacturing overhead cost budget of Marantha Company.
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Variable manufacturing overhead costs
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$33,000
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Fixed manufacturing overhead costs
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$19,800
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Normal production level in labour hours
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16,500
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Normal production level in units
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4,125
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Standard labour hours per unit
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4
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During the year, 4,000 units were produced, 16,100 hours were worked, and the actual manufacturing overhead was $54,000. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labour hours.
Instructions
(a) Compute the total, fixed, and variable predetermined manufacturing overhead rates.
(b) Compute the total, controllable, and volume overhead variances.
(c) Briefly interpret the overhead controllable and volume variances computed in (b).