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Merone Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company bases...

Merone Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company bases its predetermined overhead rate on 3,800 machine-hours. The company's total budgeted fixed manufacturing overhead is $14,060. In the most recent month, the total actual fixed manufacturing overhead was $13,480. The company actually worked 3,700 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 3,820 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

$370 Favorable

$580 Favorable

$370 Unfavorable

$74 Favorable

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Answer #1

Answers

  • Overhead volume Variance = (Standard hours allowed for actual output x Predetermined overhead rate) – Budgeted Overheads.
  • Calculation of Predetermined Overhead rate

= $ 14,060 budgeted overhead / 3800 budgeted machine hours

= 14060 / 3800

= $ 3.7 per machine hours.

  • Overhead volume Variance = (Standard hours allowed for actual output x Predetermined overhead rate) – Budgeted Overheads.

= (3,820 hours x $ 3.7 per hours) - $ 14,060

= 14,134 – 14,060

= $ 74 Favourable

  • Correct answer = Option #4: $ 74 Favourable
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