Harrah Manufacturing Company uses a standard cost system and prepared the following budget at normal capacity for October:
Directlabor hours 24,000
Variable $ \mathrm{OH} $ $ \$ 48,000 $
Fixed $ \mathrm{OH} $ $ \$ 108,000 $
Total $ \mathrm{OH} $ per $ \mathrm{DLH} $ $ \$ 6.50 $

Actual data for October were as follows:
Directlabor hours worked 22,000
Total $ \mathrm{OH} $ $ \$ 147,000 $
StandardDLHs allowed for capacity attained 21,000
Using the two-way analysis of overhead variances,what is the controllable variance for October?
A)$ 3,000 F
B)$ 5,000 F
C)$ 9,000 F
D)$10,500 U

Question

Harrah Manufacturing Company uses a standard cost system and prepared the following budget at normal capacity for October:
Directlabor hours                                  24,000
Variable $ \mathrm{OH} $                                         $ \$ 48,000 $
Fixed $ \mathrm{OH} $                                                $ \$ 108,000 $
Total $ \mathrm{OH} $ per $ \mathrm{DLH} $                                  $ \$ 6.50 $

Actual data for October were as follows:
Directlabor hours worked                            22,000
Total $ \mathrm{OH} $                                                 $ \$ 147,000 $
StandardDLHs allowed for capacity attained             21,000
Using the two-way analysis of overhead variances,what is the controllable variance for October?
A)$ 3,000 F
B)$ 5,000 F
C)$ 9,000 F
D)$10,500 U

Quizplus · Accepted Answer

The controllable variance is the difference between the actual overhead costs and the standard overhead costs that should have been incurred at the actual level of activity. In this case, the actual overhead costs were $147,000 and the standard overhead costs that should have been incurred at the actual level of activity were $144,000 (22,000 DLHs x $6.50 per DLH). Therefore, the controllable variance is $3,000 F.

Harrah Manufacturing Company Uses a Standard Cost System and Prepared OH \mathrm{OH} OH

Harrah Manufacturing Company Uses a Standard Cost System and Prepared $\mathrm{OH}$