Question

Rodarta Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's predetermined overhead rate for fixed manufacturing overhead is $4.10 per machine-hour and the denominator level of activity is 4,300 machine-hours. In the most recent month, the total actual fixed manufacturing overhead was $17,730 and the company actually worked 4,230 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 4,250 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?

Multiple Choice

$82 Favorable

$287 Favorable

$287 Unfavorable

$205 Unfavorable

.

Teall Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month:

Budgeted level of activity		8,700	MHs
Actual level of activity		8,800	MHs
Standard variable manufacturing overhead rate	$	5.90	per MH
Budgeted fixed manufacturing overhead cost	$	52,000
Actual total variable manufacturing overhead	$	53,600
Actual total fixed manufacturing overhead	$	56,200

What was the fixed manufacturing overhead budget variance for the month?

Multiple Choice

$4,200 Unfavorable

$4,200 Favorable

$590 Favorable

$590 Unfavorable

.

Answer 1

Solution 1:

Budgeted manufacturing overhead = 4300*$4.10 = $17,630

Manufacturing overhead applied = Standard hours * Predetermined overhead rate = 4250 * $4.10 = $17,425

fixed manufacturing overhead volume variance = Fixed overhead applied - budgeted fixed overhead

= $17,425 - $17,630 = $205 Unfavorable

Hence last option is correct.

Solution 2:

Fixed manufacturing overhead budget variance = Budgted fixed manufacturing overhead - Actual fixed manufacturing overhead

= $52,000 - $56,200 = $4,200 Unfavorable.

Hence first option is correct