Evaluate the relevant overhead variances for department

Reference no: EM1375508

The Milling Department uses standard machine hours to assign overhead to products. Budgeted volume for year was 36,000 machine hours. A flexible budget is used to set the overhead rate. Fixed overhead is budgeted to be $720,000 and variable overhead is predictable to be $10 per machine hour.

During the year, two products are milled. The given table summarizes operations.

Product 1

Units milled 10,500
Standard machine per unit 2
Actual machine hours used 23,000

Product 2
Units milled 12,000
Standard machine per unit 1
Actual machine hours used 13,000

Actual overhead during the year was $1.1 million.

Evaluate all the relevant overhead variances for department, and prepare a memo that explain what each one means.

Reference no: EM1375508

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