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.
a. Compute the budget variance for April. ________ __
b. Compute the volume variance for April. ________ __
Budget Variance = Difference between Budgeted Overhead and Actual Overhead.
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)
Answer: $ 6,230 Unfavourable variance
Volume Variance = Difference between ‘Standard overhead’ and ‘Budgeted Overhead’
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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