Perform a three-way breakdown of the total overhead

Question

Three-Variance Analysis Use the following data for Marilyn, Inc.

Actual total cost for direct labor	$86,800
Total direct labor hours worked	14,000
Total standard labor hours for the output in April	15,000
Direct labor rate variance-unfavorable	$2,800
Actual total overhead cost	$32,000
Budgeted fixed overhead cost	$9,000
Practical capacity, in hours	12,000
Total overhead application rate per standard direct labor hour	$2.25

Required: Use a model similar to the one presented in text Exhibit to perform a three-way breakdown of the total overhead variance, as follows:

1. Overhead spending variance.

2. Variable overhead efficiency variance.

3. Production-volume variance

4. Prepare a reconciliation of results from the two-variance and three-variance approaches.

Answer 1

Use the data and information illustrated in the problem above for Marilyn, Inc regarding Three-Variance Analysis. Required: Make use of a model identical to the one represented in text Exhibit to carry out a three-way breakdown of the net overhead variance, as follows: 1) Overhead spending variance. 2) Variable overhead efficiency variance. 3) Production-volume variance 4) Make a reconciliation of outcomes from the 2-variance and 3-variance approaches.