E8-26 (Overhead variances, missing information; page 293) (Horngren, Datar, & Rajan, 2012) Dvent budgets 18,000 machine-hours for the production of computer chips in August 2011. The budget variable overhead rate is $6 per machine-hour. At the end of August, there is a $375 favorable spending variance for variable overhead and a $1,575 unfavorable spending variance for fixed overhead. For the computer chips produced, 14,850 machine-hours are budgeted and 15,000 machine-hours are actually used. Total actual overhead costs are $120,000. Required Compute efficiency and flexible-budget variances for Dvent’s variable overhead in August 2011. Will variable overhead be over- or underallocated? By how much? Compute production-volume and flexible-budget variances for Dvent’s fixed overhead in August 2011. Will fixed overhead be over- or underallocated? By how much? E8-27 (Identifying favorable and unfavorable variances; page 293) Purdue, Inc. manufactures tires for large auto companies. It uses standard costing and allocates variable and fixed manufacturing overhead based on machine-hours. For each independent scenario given, indicate whether each of the manufacturing variances will be favorable or unfavorable or, in case of insufficient information, indicate “CBD”� (cannot be determined).
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