Reference no: EM13876759

Overhead at Two Activity Levels and Four-Variance Versus Two-Variance Analysis Greenhat Company applies factory overhead based on machine hours. The company had the following budget for its operation in 2009, which was at 80 percent level of theoretical capacity:

Standard machine hours (MH)           20,000
Variable factory overhead                 $72,000
Total factory overhead rate per MH   $12.60

Greenhat budgeted its operation for 2010 at 90 percent of theoretical capacity. The standard calls for 2 machine hours per unit manufactured. During 2010 Greenhat used 23,000 machine-hours to manufac- ture 11,300 units. The company incurred $12,000 more factory overhead cost than the flexible-budget amount for the units manufactured, of which $5,000 was due to fixed factory overhead.

Required

1. What is the budgeted fixed factory overhead at an 80 percent level of operation? At a 100 percent level of operation?

2. What was the standard variable factory overhead rate and the standard fixed factory overhead rate in 2010? (Assume no change in the variable overhead rate.)

3. What is the total factory overhead flexible-budget amount for 2010? (Assume no cost change from 2009.)

4. Compute the following four overhead variances for the Greenhat Company:

a. Variable overhead spending variance.

b. Variable overhead efficiency variance.

c. Fixed overhead spending variance.

d. Production-volume variance.

5. Compute the following two overhead variances for the Greenhat Company:

a. Total flexible-budget variance.

b. Production-volume variance.