Question

Answer the following questions (#25 and #26) using the information below:

Jenny's Corporation manufactured 26,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20 per machine-hour. The following fixed overhead data pertain to March:

                                                                         Actual      Static Budget

Production                                               26,000 units         24,000 units

Machine-hours                                         6,100 hours          6,000 hours

Fixed overhead costs                                   $126,000              $120,000

What is the fixed overhead spending variance?

• A.

  $6,000 unfavorable

• B.

  $2,000 unfavorable

• C.

  $4,000 favorable

• D.

  $10,000 favorable

Jenny's Corporation manufactured 26,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20 per machine-hour. The following fixed overhead data pertain to March:

  Actual      Static Budget

Production                                               26,000 units 24,000 units

Machine-hours                                         6,100 hours          6,000 hours

Fixed overhead costs                                   $126,000              $120,000

What is the fixed overhead production-volume variance?

• A.

  $4,000 favorable

• B.

  $10,000 favorable

• C.

  $2,000 unfavorable

• D.

  $6,000 unfavorable

Answer 1

25) Fixed overhead spending variance

Formula for Fixed overhead spending variance

Spenig variance = Actual Fixed overhead - Budgeted Fixed overhead.

Spening variance = $126,000-$120,000

Spening variance= $6,000 Adverse.

Option A is correct answer which is $6,000 unfavourable.

26) Fixed overhead Prodction-volume variance

The fixed overhead volume variance is the difference between the amount of fixed overhead actually applied to produced goods based on prodution volume, and the amount that was budgeted to be applied to produced goods.

Budgeted fixed cost per unit = $5 ($120,000/24,000)

Actual production = 26,000 units

Actual fixed overhead allocated = $130,000 (26,000*$5)

Fixed overhead volume variance = $10,000 ($130,000-$120,000)

Option B is correct answer which is $10,000 favourable.