Question

Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: Total budgeted fixed overhead cost for the year $ 525,100 Actual fixed overhead cost for the year $ 521,100 Budgeted direct labor-hours (denominator level of activity) 59,000 Actual direct labor-hours 60,000 Standard direct labor-hours allowed for the actual output 57,000 Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.) 2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

Answer 1

Answer: $9.21, 4000F, 18,420U

Explanation:

GIVEN THE FOLLOWING ;

Total budgeted fixed overhead cost for the year = $525,100

Actual fixed overhead cost for the year = $521,100

Budgeted direct labor-hours (denominator level of activity) = 59,000

Actual direct Labor hours = 60,000 Standard direct labor-hours allowed for the actual output = 57,000

A.) Fixed portion of predetermined overhead rate = (total budgeted fixed overhead ÷ denominator level of activity)

$525,100 ÷ 57,000 = $9.21 per direct Labor hour

Budget variance = Actual fixed overhead - budgeted fixed overhead

$521,100 - $525,100 = $4000F

Volume variance = fixed portion of predetermined overhead × (denominator hours - standard hours allowed)

$9.21 × (59,000 - 57,000)

$9.21 × (2000)

18,420U