Question

Assume that $102,000 is budgeted for fixed overhead. $95,000 was actually spent on fixed overhead. Fixed...

Assume that $102,000 is budgeted for fixed overhead. $95,000 was actually spent on fixed overhead. Fixed overhead is applied to production at $10 per labor hour, and the achieved output was 5,000 units. The standard labor hours are 2 hours per unit.

The total fixed overhead variance is $2,000 favorable.

All of these choices are correct.

The fixed overhead spending variance is $7,000 favorable.

The fixed overhead volume variance is $5,000 unfavorable.

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Homework Answers

Answer #1

Solution:

Budgeted fixed overhead = $102,000

Actual fixed overhead = $95,000

Fixed overhead applied = SH * SR = 5000*2*$10 = $100,000

Total fixed overhead variance = Fixed overhead applied - actual fixed overhead = $100,000 - $95,000 = $5,000 F

Fixed overhead spending variance = Budgeted fixed overhead - Actual fixed overhead = $102,000 - $95,000 = $7,000 Favorable

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead = $100,000 - $102,000 = $2,000 unfavorable

Hence 3rd option is correct.

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