Problem: NPC developed its overhead application rate from the annual budget. The budget is based on an expected total output of 720,000 units requiring 3,600,000 machine hours. The company is able to schedule production uniformly throughout the year.
A total of 66,000 units requiring 315,000 machine hours were produced during May. Actual overhead costs for May amonted to 375,000. The actual costs, as rcompared to the annual budget and to 1/12 of the annual budget are:
Total per unit per machine monthly acctual
Amount hours budget cost for May
Variable overhead:
indirect material...1,224,000 1.70 0.34 102,000 111,000
indirect labour........900,000 1.25 0.25 75,000 75,000
Fixed overhead:
supervision...........648,000 0.90 0.18 54,000 51,000
utilities..................540,000 0.75 0.15 45,000 54,000
depreciation..........1,008,000 1.40 0.28 84,000 84,000
Total: 4,320,000 6.00 1.20 360,000 375,000
Question 1. Prepare a schedule showing the following amounts for NPC in May.
a. Applied overhead costs
b. Variable overhead spending variance
c. fixed overhead budget variance
d. variable overhead efficiency variance
e. fixed overhead volume variance
Question 2. Draw a graph to depict the variable overhead variances.