Question

Calculating the Fixed Overhead Spending and Volume Variances Standish Company manufactures consumer products and provided the following information for the month of February: Units produced 131,300 Standard direct labor hours per unit 0.2 Standard fixed overhead rate (per direct labor hour) $2.20 Budgeted fixed overhead $64,800 Actual fixed overhead costs $68,700 Actual hours worked 26,500 Required: 1. Calculate the fixed overhead spending variance using the formula approach.

Calculate the volume variance using the formula approach.

What if 127,300 units had actually been produced in February? What impact would that have had? Indicate what the new variances would be below.

Answer 1

1. Fixed overhead Spending Variance = Budgeted Fixed Overhead - Actual Fixed overhead

= $64800 - $68700 = $3900 Unfavorable

2. Fixed Overhead Volume Variance = Standard Fixed Overhead - Budgeted Fixed overhead

= (131300*0.20*2.20) - $64800

= $57772 - 64800 = $7028 Unfavorable

3. Fixed overhead Spending Variance = Budgeted Fixed Overhead - Actual Fixed overhead

= $64800 - $68700 = $3900 Unfavorable

Fixed Overhead Volume Variance = Standard Fixed Overhead - Budgeted Fixed overhead

= (127300*0.20*2.20) - $64800

= $56012 - 64800 = $8788 Unfavorable