E11.21 Constructing a flexible overhead budget. – LO 11.3
The chief accountant for Rainbow Community Hospital estimates that the hospital uses $0.60 kilowatt hours of electricity per patient-day, and that the cost of electricity will be $30 per kilowatt hour. The hospital also pays a fixed monthly charge of $15,000 to the electricity supplier to rent emergency back-up electricity generators.
Construct a flexible budget for the hospital’s electricity cost using each of the following techniques:
A formula flexible budget
A report form flexible budget for 20 000, 30 000 and 40 000 patient-days of activity. List variable and fixed electricity costs separately.
E11.22 Straightforward Calculation of Overhead Variances: Manufacturer. – LO 11.5
The data below relate to Super Fit Ltd, a manufacturer of exercise equipment, for the month of August:
Standard variable overhead rate $18 per machine hour
Standard quantity of machine hours 2 hours per unit of output
Budgeted fixed overhead $180 000
Budgeted output 15 000 units
Actual results for August are as follows:
Actual output 13 500 units
Actual variable overhead $504 900
Actual fixed overhead $183 000
Actual machine time 29 700 machine hours
Calculate the following variances, indicating whether each variance is favourable or unfavourable:
1. Variable overhead spending variance.
2. Variable overhead efficiency variance.
3. Fixed overhead budget variance.
4. Fixed overhead volume variance.