The standard fixed factory overhead rate is based on 100% capacity of 50,000 direct labor hours. The standard costs and the actual costs for factory overhead for the production of 8,000 units during the current month were as follows.
|Standard:||40,000 hours at $3||$120,000|
|(41,000 direct labor hours)||131,200|
If there was a $9,000 unfavorable volume variance for December, what is the standard fixed factory overhead cost rate?
Total applied overhead = $120,000
Overhead volume variance = $9,000 U
Total budgeted overhead for 40000 hours = Total applied overhead + Overhead volume variance = $120,000 + $9,000 = $129,000
Budgeted overhead = Fixed overhead + Variable overhead
Budgeted overheat at 50000 direct labor hours = 50000*$3 = $150,000
Variable overhead cost per direct labor hour = ($150,000 - $129000) / (50000 - 40000) = $2.10 per hour
Therefore standard fixed factory overhead cost rate = $3 - $2.10 = $0.90 per direct labor hour
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