Neptune Inc. uses a standard cost system and has the following information for the most recent month, April:

Actual direct labor hours (DLHs) worked 17,000
Standard direct labor hours allowed for good output produced this period 18,000
Actual total factory overhead costs incurred $45,400
Budgeted fixed factory overhead costs $10,800
Denominator activity level, in direct labor hours (DLHs) 15,000
Total factory overhead application rate per standard direct labor hour $2.70

1. The total underapplied or overapplied factory overhead in April for Neptune, Inc. was:
2. The total factory overhead spending variance in April for Neptune, Inc. was:
3. The factory overhead production volume variance in April for Neptune, Inc. was:
4. The variable factory overhead efficiency variance for Neptune, Inc. in April was:
5. The total factory overhead flexible-budget variance in April for Neptune, Inc. was:

1.  $3, 200 favorable

2. $940 unfavorable

3. not able to answer

4. $1, 980 favorable

5. not able to answer

Explanation:

Standard costing is the practice of substituting an expected (or budgeted) cost for an actual cost in the accounting records of an organization. As a result, variances are recorded to show the difference between the expected and the actual costs.

How is standard cost calculated?

to find the standard cost, you need to determine the cost of direct materials, direct labor, and overhead per unit. Theses costs are added up. To determine the standard cost of direct materials, for example, multiply the materials at standard price by the direct materials standard quantity needed for each unit.  

The same principle is applied for direct labor, and overhead costs.

Answers:

1.The total underapplied or overapplied factory overhead in April for Neptune, Inc. was:

=$2.70 x 18, 000

=$48, 600

=$48, 600 - $45, 400

= $3, 200 Favorable

2.The total factory overhead spending variance in April for Neptune, Inc was:

= $10, 800 / 15, 000  

= 0.72 (deduct from standard labor rate)

[2.7 – 0.72 = 1.98]

= 1.98 x 17, 000 (actual hours)

= $33, 660

= $10, 800 + $33, 660

= $44, 460 (actual)

$44, 460 - $45, 400 = $940 Unfavorable

3.The factory overhead production volume variance in April for Neptune Inc, was:

There is not sufficient information to answer this question.

The production volume variance measures the amount of overhead applied to the number of units produced. This is the difference between the actual number of units produced and the budgeted number of units that should have been produced.

4.The variable factory overhead efficiency variance for Neptune, Inc. in April was:

= $1.98 x (17, 000 – 18, 000) direct labor hours

= $1, 980 Favorable

5.  The total factory overhead flexible-budget variance in April for Neptune, Inc. was:

There is not enough available information to answer this question.

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