Answer:
A. (a) 3,900 (unfavorable).
B. (d) 3,000 (favorable).
C. (c) 10,525 (favorable).
Explanation:
Requirement A
We know,
Fixed overhead spending variance = (Budgeted fixed overhead - Actual fixed overhead)
Given,
Budgeted fixed overhead = $67,500
Actual fixed overhead = $71,400
Putting the values into the formula, we can get
Fixed overhead spending variance = (Budgeted fixed overhead - Actual fixed overhead)
Or, Fixed overhead spending variance = ($67,500 - $71,400)
Or, Fixed overhead spending variance = -3,900
Therefore, Fixed overhead spending variance = 3,900 (unfavorable).
Since Budgeted fixed overhead is less than Actual fixed overhead, the situation is unfavorable.
So option A is the answer.
Requirement B
We know,
Fixed overhead volume variance = (Standard units - Budgeted units) × Standard fixed overhead rate.
Given,
Standard units = 4,700 units
Budgeted units = 4,500 units
Standard fixed overhead rate = $67,500 ÷ 4,500
Standard fixed overhead rate = $15
Putting the values into the formula, we can get
Fixed overhead volume variance = (4,700 - 4,500) × $15
Or, Fixed overhead volume variance = 200 × $15
Or, Fixed overhead volume variance = 3,000
Therefore, Fixed overhead volume variance = 3,000 (favorable)
Since budgeted fixed volume is higher than Actual fixed volume, the situation is favorable.
So option D is the answer.
Requirement C
We know,
Direct labor rate variance = (Standard rate - Actual rate) × Actual hour
Given,
Standard rate = $22.50
Actual rate = $189,500 ÷ 8,890 = 21.3161
Actual hour = 8,890
Putting the values into the formula, we can get
Direct labor rate variance = ($22.50 - 21.3161) × 8,890
Or, Direct labor rate variance = 1.1839 × 8,890
Or, Direct labor rate variance = 10,525
Therefore, Direct labor rate variance = 10,525 (favorable).
Since direct labor rate is higher than Actual labor rate, the situation is favorable.
So option C is the answer.
