8,900
Formula
(per car)
Cars
Overhead Costs
Cars Variance
Variable overhead costs:
Cleaning supplies ... 0.80 7,080 7,120 40 F
Electricity ... 0.30 2,460 2,670 210 F
Maintenance ... 0.20 1,550 1,780 230 F
Total variable overhead cost... 1.30 11,090 11,570 480 F
Fixed overhead costs:
Operator wages ... 9,100 9,000 100 U
Depreciation ... 7,000 6,000 1,000 U
Rent... 8,000 8,000 0
Total fixed overhead cost ... 24,100 23,000 1,100 U
Total overhead cost ... 35,190 34,570 620 U
Students may question the variances for fixed costs. Operator wages can
differ from what was budgeted for a variety of reasons including an unan-
ticipated increase in the wage rate; changes in the mix of workers between
those earning lower and higher wages; changes in the number of operators
on duty; and overtime. Depreciation may have increased because of the
acquisition of new equipment or because of a loss on equipment that must
be scrapped—perhaps due to poor maintenance. (This assumes that the
loss flows through the depreciation account on the performance report.)
© The McGraw-Hill Companies, Inc., 2006. All rights reserved.
Solutions Manual, Chapter 11 653
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