Longman Company manufactures shirts. During June, Longman made 1,900 shirts but had budgeted production at 2,150 shirts. Longman gathered the following additional data: Variable overhead cost standard $0.80 per DLHr
Direct labor efficiency standard 4.50 DLHr per shirt
Actual amount of direct labor hours 8,620 DLHr
Actual cost of variable overhead $10,344
Fixed overhead cost standard $0.10 per DLHr
Budgeted fixed overhead $968
Actual cost of fixed overhead $1,033

Required:
a. Calculate the variable overhead cost variance.
b. Calculate the variable overhead efficiency variance.
c. Calculate the total variable overhead variance.
d. Calculate the fixed overhead cost variance.
e. Calculate the fixed overhead volume variance

a.  variable overhead cost variance-   $3,448  Unfavorable

b.  variable overhead efficiency variance-  $ 56 unfavorable

c. total variable overhead variance -   $3,504  Unfavorable

d. fixed overhead cost variance - $65   unfavorable

e. Fixed overhead volume variance -$ 112.5   unfavorable

Explanation:

Variable overhead rate variance                                          $

8,620 hours should have cost (8,620  × $0.80)               6896

but did cost                                                                         10,344

Variable overhead rate variance                                    3,448 Unfavorable

Variable overhead rate variance  =$3,448 unfavorable

Efficiency variance                                                                 Hours

190 units should have taken (1,900 × 4.50 hrs)                  8,550

but did take                                                                            8,620

Efficiency variance in hours                                                    70   unfavorable

Standard rate                                                                    ×   $0.80

Efficiency variance                                                           $ 56 unfavorable

Efficiency variance  =$ 56 unfavorable

Total variable overhead= rate variance +efficiency

Total variable overhead =  $3,448 UF + $ 56 UF =  $3,504  U

Total variable overhead = $3,504  Unfavorable

Fixed overhead cost variance

                                                                      $

Budgeted cost                                           968

Actual cost                                                1,033

Fixed overhead cost Variance           65   unfavorable

Fixed Overhead Volume

                                                                            Units

Budgeted units                                                 2,150                                      

Actual    units                                                       1,900

Variance                                                                  250

Standard fixed cost per unit (Notes)                $0.45

Volume Variance                                             112.5   unfavorable

Standard fixed overhead cost per unit

= standard hours × standard Fixed overhead rate = 4.5 × $0.1= $0.45

a.  variable overhead cost variance-   $3,448 Unfavorable

b.  variable overhead efficiency variance-  $ 56 unfavorable

c. total variable overhead variance -   $3,504  Unfavorable

d. fixed overhead cost variance - $65   unfavorable

e. Fixed overhead volume variance -$ 112.5   unfavorable

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation: