(Appendix 11A)Nova Corporation produces a single product and uses a standard cost system to help control costs.Overhead is applied to production on the basis of standard machine-hours.According to the company's flexible budget, the following overhead costs should be incurred at an activity level of 18, 000 machine-hours (the denominator activity level chosen for the current year): During the current year, the following operating results were recorded: At the end of the year, the company's Manufacturing Overhead account showed total debits for actual overhead costs of $145, 100 and total credits of $136, 000 for overhead applied.The difference ($9, 100)represents under-applied overhead, the cause of which management would like to know.
Required:
a.Compute the predetermined overhead rate that would have been used during the year, showing separately the variable and fixed components of the rate.
b.Show how the $136, 000 of overhead actually applied was computed.
c.Analyze the $9, 100 under-applied overhead figure in terms of the variable overhead rate and efficiency variances and the fixed manufacturing overhead budget and volume variances.

Question

(Appendix 11A)Nova Corporation produces a single product and uses a standard cost system to help control costs.Overhead is applied to production on the basis of standard machine-hours.According to the company's flexible budget, the following overhead costs should be incurred at an activity level of 18, 000 machine-hours (the denominator activity level chosen for the current year):

During the current year, the following operating results were recorded:

At the end of the year, the company's Manufacturing Overhead account showed total debits for actual overhead costs of $145, 100 and total credits of $136, 000 for overhead applied.The difference ($9, 100)represents under-applied overhead, the cause of which management would like to know.
Required:
a.Compute the predetermined overhead rate that would have been used during the year, showing separately the variable and fixed components of the rate.
b.Show how the $136, 000 of overhead actually applied was computed.
c.Analyze the $9, 100 under-applied overhead figure in terms of the variable overhead rate and efficiency variances and the fixed manufacturing overhead budget and volume variances.

Quizplus · Accepted Answer

The Answer of (Appendix 11A)Nova Corporation produces a single product and uses a standard cost system to help control costs.Overhead is applied to production on the basis of standard machine-hours.According to the company's flexible budget, the following overhead costs should be incurred at an activity level of 18, 000 machine-hours (the denominator activity level chosen for the current year): During the current year, the following operating results were recorded: At the end of the year, the company's Manufacturing Overhead account showed total debits for actual overhead costs of $145, 100 and total credits of $136, 000 for overhead applied.The difference ($9, 100)represents under-applied overhead, the cause of which management would like to know. Required: a.Compute the predetermined overhead rate that would have been used during the year, showing separately the variable and fixed components of the rate. b.Show how the $136, 000 of overhead actually applied was computed. c.Analyze the $9, 100 under-applied overhead figure in terms of the variable overhead rate and efficiency variances and the fixed manufacturing overhead budget and volume variances.

(Appendix 11A)Nova Corporation Produces a Single Product and Uses a Standard