Your next-door neighbor recently began a new job as assistant controller for Conundrum Corporation. As her first assignment, she prepared a performance report for January. She was scheduled to present the report

Your next-door neighbor recently began a new job as assistant controller for Conundrum Corporation. As her first assignment, she prepared a performance report for January. She was scheduled to present the report to management the next morning, so she brought it home to review. As the two of you chatted in the backyard, she decided to show you the report she had prepared. Unfortunately, your dog thought the report was an object to be fetched. The pup made a flying leap and got a firm grip on the report. After chasing the dog around the block, you managed to wrest the report from its teeth. Needless to say, it was torn to bits. Only certain data are legible on the report. This information follows:

  

CONUNDRUM CORPORATION

Performance Report For the Month of January

Direct Material

Direct Labor

Variable Overhead

Fixed Overhead

Standard allowed cost   given actual output

?

?

(? kilograms at $10per kilogram)

(2 hours at $16 per hour)

Flexible overhead budget

?

$

36,000

Actual cost

$

189,000

?

?

?

(16,000 kilograms at $15.5 per kilogram)

(10,800 hours at ? per hour)

Direct-material price variance

?

Direct-material quantity variance

$

6,000

U

Direct-labor rate variance

$

10,800

U

Direct-labor efficiency variance

4,800

F

Variable-overhead spending variance

$

2,640

U

Variable-overhead efficiency variance

2,000

F

Fixed-overhead budget variance

$

3,250

U

Fixed-overhead volume variance

?

  

In addition to the fragmentary data still legible on the performance report, your neighbor happened to remember the following facts.

  

•	Planned production of Conundrum's sole product was 400 units more than the actual production.
•	All of the direct material purchased in January was used in production.
•	There were no beginning or ending inventories.
•	Variable and fixed overhead are applied on the basis of direct-labor hours. The fixed overhead rate is $3 per hour.

  

Required:

Feeling guilty, you have agreed to help your neighbor reconstruct the following facts, which will be necessary for her presentation. Indicate whether the variance is favorable or unfavorable.(Round "Actual variable-overhead rate" to 2 decimal places. Select "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round your intermediate calculations. Omit the "$" sign in your response.)

  

1.	Planned production (in units).
2.	Actual production (in units).
3.	Actual fixed overhead.	$
4.	Total standard allowed direct-labor hours.
5.	Actual direct-labor rate.	$
6.	Standard variable-overhead rate.	$
7.	Actual variable-overhead rate.	$
8.	Standard direct-material quantity per unit.
9.	Direct-material price variance.	$	Unfavorable
10.	Applied fixed overhead.	$
11.	Fixed-overhead volume variance.	$	Unfavorable

Explanation:

1.

Planned production = 6,000 units.

  

The reasoning is as follows:

  

Fixed-overhead rate per direct-labor hour	=	budgeted fixed overhead
		planned direct-labor hours
$3 per hr.	=	$36,000
		X

  

Therefore, planned direct-labor hours (X) equals 12,000 hours.

  

Planned direct-labor hours	=	planned production × standard hours per unit
12,000 hr.	=	X × 2 hr. per unit

  

Therefore, planned production (X) equals 6,000 units.

 
2.

Actual production	=	planned production – 400 units
	=	6,000 units – 400 units
	=	5,600 units

 
3.

Actual fixed overhead = $39,250.

  

Fixed overhead budget variance	=	actual fixed overhead – budgeted fixed overhead
$3,250 U	=	X – $36,000

  

Therefore, actual fixed overhead (X) equals $39,250.

 
4.

Total standard allowed direct-labor hours

= 5,600 units produced × 2 hr. per unit

= 11,200 hr.

 
5.

Actual direct-labor rate = $17 per hour.

  

Direct-labor rate variance	=	AH(AR – SR)
$10,800 U	=	10,800(AR – $16)

  

Therefore, AR = $17.

 
6.

Standard variable-overhead rate = $5 per direct-labor hour.

 

Variable-overhead efficiency variance	=	SVR(AH – SH)
$2,000 F	=	SVR(10,800 – 11,200)

 

Therefore, SVR = $5 per hr.

 
7.

Actual variable-overhead rate = $5.2 per direct-labor hour.

  

Variable-overhead spending variance	=	AH(AVR – SVR)
$2,640 U	=	10,800(AVR – $5)

  

Therefore, AVR = $5.2 per hr.

 
8.

Standard direct-material quantity per unit	=	total standard direct-material quantity allowed
		actual production in units
	=	15,400 kg.*
		5,600 units
	=	3 kg.

  

*Direct-material quantity variance	=	SP(AQ – SQ)
$6,000 U	=	$10(16,000 – SQ)
SQ	=	15,400 kg.

 
9.

Direct-material price variance	=	PQ(AP – SP)
	=	16,000($15.5 – $10)
	=	$88,000 U

 
10.

Applied fixed overhead	=	standard fixed-overhead rate × standard allowed hours
	=	$3 per hr. × 11,200 hr.
	=	$33,600

 
11.

Fixed-overhead volume variance	=	budgeted fixed overhead – applied fixed overhead
	=	$36,000 – $33,600
	=	$2,400 (Positive)*

  

*	Some accountants would designate a positive volume variance as "unfavorable" because planned production exceeded actual production, but some accountants may choose not to interpret the volume variance as either favorable or unfavorable.