Calgary Paper Company produces paper for photocopiers. The company has developed standard overhead rates based on a monthly capacity of 62,000 direct-labor hours as follows: Standard costs per unit (one box of paper): Variable overhead (2 direct-labor hours @ $4.5 per hour)$9 Fixed overhead (2 direct-labor hours @ $10 per hour) 20 Total$29 During April, 31,000 units were scheduled for production; however, only 26,000 units were actually produced. The following data relate to April. Actual direct-labor cost incurred was $848,000 for 53,000 actual hours of work.Actual overhead incurred totaled $843,800, of which $243,800 was variable and $600,000 was fixed.Required:Prepare two exhibits similar to Exhibit 11-6 and Exhibit 11-8 in the chapter, which show the following variances. State whether each variance is favorable or unfavorable, where appropriate.1. Variable-overhead spending variance.2. Variable-overhead efficiency variance.3. Fixed-overhead budget variance.4. Fixed-overhead volume variance.

Fixed cost are the cost which do not change when sales or production volume increase or decrease.…

Answered: Calgary Paper Company produces paper…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter9: Evaluating Variances From Standard Costs

Section: Chapter Questions

Problem 10E: Ada Clothes Company produced 40,000 units during April. The Cutting Department used 12,800 direct...

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Question

Calgary Paper Company produces paper for photocopiers. The company has developed standard overhead rates based on a monthly capacity of 62,000 direct-labor hours as follows:


Standard costs per unit (one box of paper):
Variable overhead (2 direct-labor hours @ $4.5 per hour)	$	9
Fixed overhead (2 direct-labor hours @ $10 per hour)		20
Total	$	29

During April, 31,000 units were scheduled for production; however, only 26,000 units were actually produced. The following data relate to April.

Actual direct-labor cost incurred was $848,000 for 53,000 actual hours of work.
Actual overhead incurred totaled $843,800, of which $243,800 was variable and $600,000 was fixed.

Required:
Prepare two exhibits similar to Exhibit 11-6 and Exhibit 11-8 in the chapter, which show the following variances. State whether each variance is favorable or unfavorable, where appropriate.
1. Variable-overhead spending variance.
2. Variable-overhead efficiency variance.
3. Fixed-overhead budget variance.
4. Fixed-overhead volume variance.

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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