Question

Lossing Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below:

	Original Budget			Actual Costs
Variable overhead costs:
Supplies	$	6,400		$	6,590
Indirect labor		10,580			9,930
Fixed overhead costs:
Supervision		14,210			14,350
Utilities		13,500			13,550
Factory depreciation		57,440			57,250
Total overhead cost	$	102,130		$	101,670

The company based its original budget on 6,500 machine-hours. The company actually worked 6,460 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,390 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? (Round your intermediate calculations to 2 decimal places.)

Garrison 16e Rechecks 2017-10-31

Multiple Choice

$1,345 favorable

$1,441 favorable

$1,441 unfavorable

$1,345 unfavorable

Answer 1

	Fixed overhead volume variance=Absorbed fixed overheads-Budgeted fixed overheads
	Absorbed fixed overhead=Standard hours*Fixed overhead absorption rate
	Fixed overhead absorption rate=Budgeted fixed overhead/Budgeted hours
	Budgeted fixed overhead:
	Supervision		14210
	Utilities		13500
	Factory depreciation		57440
	Total		85150
	Fixed overhead absorption rate=85150/6500=$13.10 per hour
	Absorbed fixed overhead=6390*13.10=84626
	Fixed overhead volume variance=83709-85150=1441 Unfavorable
	Answer is $1441 Unfavorable