Question

# Primara Corporation has a standard cost system in which it applies overhead to products based on...

 Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:
 Total budgeted fixed overhead cost for the year \$495,900 Actual fixed overhead cost for the year \$486,000 Budgeted standard direct labor-hours (denominator level of activity) 57,000 Actual direct labor-hours 58,000 Standard direct labor-hours allowed for the actual output 55,000
 Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.)

 2. Compute the fixed overhead budget variance and volume variance. (Round Fixed portion of the predetermined overhead rate to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.))

Requirement - 1

Fixed portion of the predetermined overhead rate for the year = \$8.70 per DLH

Fixed portion of the predetermined overhead rate = Fixed overhead / Denominator level of activity

= \$495,900 / 57,000

= \$8.70 per DLH

Requirement - 2

Budget variance= Actual FOH – Budgeted FOH

= \$486,000 – 495,900

= \$9,900 F ( Favorable)

Volume variance = Fixed proportion of the predetermined overhead rate × (Denominator hours – Standard hours allowed)

= \$8.70 per DLH × (57,000 DLH – 55,000 DLH)

= \$17,400 U (Unfavorable)

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