Question

Holl Corporation has provided the following data for November.

Denominator level of activity		5,100	machine-hours
Budgeted fixed manufacturing overhead costs	$	61,710
Standard machine-hours allowed for the actual output		5,400	machine-hours
Actual fixed manufacturing overhead costs	$	60,690

Required:

a. Compute the budget variance for November.

b. Compute the volume variance for November.

Answer 1

Standard Fixed Overhead Rate = Budgeted Fixed Manufacturing Overhead Costs / Budgeted Level of Activity
Standard Fixed Overhead Rate = $61,710 / 5,100
Standard Fixed Overhead Rate = $12.10

Answer a.

Budget Variance = Actual Fixed Overhead Costs - Budgeted Fixed Overhead Costs
Budget Variance = $60,690 - $61,710
Budget Variance = $1,020 Favorable

Answer b.

Volume Variance = Budgeted Fixed Overhead Costs - Standard Fixed Overhead Rate * Standard Machine-hours allowed
Volume Variance = $61,710 - $12.10 * 5,400
Volume Variance = $3,630 Favorable