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Financial & Managerial Accounting
Found in: Page 978
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Refer to the information in Problem 21-4A.

Required Compute these variances:

(a) variable overhead spending and efficiency,

(b) fixed overhead spending and volume, and

(c) total overhead controllable.

(a) The variable overhead spending and efficiency variances are unfavorable.

(b)The fixed overhead spending and efficiency variances are favorable.

(c) The total overhead controllable variance is unfavorable.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Favorable Variances

A variance is favorable when the actual revenues are more than the budgeted revenues or the actual costs are less than the budgeted costs. Variances are the difference between the actual and budgeted outcomes.

Step 2: (a) Computation of variable overhead spending and efficiency variances

Step 3: (b) Computation of fixed overhead spending and volume variances

Step 4: (c) Computation of total controllable overhead

Total Overhead Controllable Variance

Particulars

Amounts ($)

Variable spending variance (Unfavorable)

(80,000)

Add: Efficiency variance (Unfavorable)

(200,000)

Add: Fixed spending variance (Favorable)

50,000

Controllable variance

230,000

(Unfavorable)

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