Question

Merone Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company bases its predetermined overhead rate on 2,800 machine-hours. The company's total budgeted fixed manufacturing overhead is $7,560. In the most recent month, the total actual fixed manufacturing overhead was $6,640. The company actually worked 2,700 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,820 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? (Round your intermediate calculations to 2 decimal places.)

Answer 1

Answer:

Fixed Overhead Volume Variance $ 54 Favorable

Explanation:

Fixed Overhead Volume variance is the difference between the budgeted fixed overhead and applied fixed overhead.

Budgeted Fixed Overhead = $7,560

Applied Fixed Overhead = Standard Rate * Standard Hours

Standard Rate for Fixed Overhead = $7,560/2,800 = $ 2.7

Applied Fixed Overhead = $ 2.7*2,820= $ 7614

Fixed Overhead Volume Variance=Budgeted Fixed Overhead-Applied Fixed Overhead

Fixed Overhead Volume Variance= $7,560-$ 7614= $ 54 Favorable

If applied overhead is more than budgeted overhead it is favorable because it indicates that the budgeted overhead is within in the standard range.