Question

# Wangerin Corporation applies overhead to products based on machine-hours. The denominator level of activity is 8,900...

Wangerin Corporation applies overhead to products based on machine-hours. The denominator level of activity is 8,900 machine-hours. The budgeted fixed manufacturing overhead costs are \$328,410. In April, the actual fixed manufacturing overhead costs were \$334,640 and the standard machine-hours allowed for the actual output were 9,200 machine-hours.

Required:

a. Compute the budget variance for April. ________ __

b. Compute the volume variance for April. ________ __

• All working forms part of the answer
• Requirement ‘a’

If Budgeted Overhead are MORE than actual overhead, the difference is a FAVOURABLE Variance, otherwise, it will be a case of UNFAVOURABLE VARIANCE.

Calculation of Budget Variance = \$ 328,410 - \$ 334,640 = \$ (6,230)

• Requirement ‘b’

Predetermined rate = \$ 328,410 / 8900 machine hours = \$ 36.90 per machine hours.

Actual machine hours = 9,200

Standard overhead = 9200 machine hours x \$ 36.90 = \$ 339,480

Calculation of Volume Variance = \$ 339,480 - \$ 328,410 = \$ 11,070 Unfavourable Variance.

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