Question

The following information applies to questions 1-3:

Actual fixed overhead cost: $35,200

Budgeted fixed overhead cost: $35,000

Budgeted fixed overhead rate, based on 10,000 machine hours: $3.50

Standard machine hours per unit: 1/2 hour

Actual units produced: 17,600

1.          Compute the fixed overhead budget variance:

a. $4,400 favorable              c. $4,200 favorable

b. $200 unfavorable              d. $200 favorable

2.          Compute the fixed overhead volume variance:

a. $200 unfavorable             c. $200 favorable

b. $4,400 favorable               d. $4,200 unfavorable

3.          An unfavorable fixed overhead volume variance would indicate that:

a. fewer units were made during the period than had been budgeted

b. more units were made during the period than had been budgeted

c. fewer labor hours were worked during the period than had been budgeted

d. more labor hours were worked during the period than had been budgeted

Answer 1

1. Fixed Overhead budget Variance

b. $200 unfavorable

Fixed Overhead budget Variance = Budgeted fixed overhead cost - Actual fixed overhead cost

Fixed Overhead budget Variance = $35,000-35200 = $200 unfavorable

2. Fixed Overhead Volume Variance = Applied Fixed Overhead – Budgeted Fixed Overhead

d. $4,200 unfavorable

Fixed Overhead Volume Variance =(17600*1/2 hours) *$3.5 - $35000

Fixed Overhead Volume Variance = $4200 unfavorable

3. An unfavorable fixed overhead volume variance would indicate that

a. fewer units were made during the period than had been budgeted