Question

Jessep Corporation has a standard cost system in which manufacturingoverhead is applied to units of product on the basis of direct labor hours.The company has provided the following data concerning its fixedmanufacturing overhead costs in MarchDenominator hours15,000 hoursActual hours worked14,000 hoursStandard hours allowed for the output12,000 hoursFlexible budget fixed overhead cost$45,000Actual fixed overhead costs$48,000The fixed overhead volume variance is (M)a. $3,000 U.b. $9,000 U.c. $3,000 F.d. $6,000 U.

Answer 1

Answer:

Standard fixed overhead rate

= Budgeted fixed overhead cost

  Budgeted direct labour hours

= $45,000

  15,000 hours

= $3 per direct labour hour

Fixed overhead volume variance

= (Standard hours - Budgeted hours) x Standard fixed overhead rate

= (12,000 hours - 15,000  hours)  x $3

= $9,000(U)

The correct answer is B

Explanation:

In this case, we need to calculate standard fixed overhead rate, which is budgeted fixed overhead cost  divided by budgeted direct labour hours. Then, we will calculate fixed overhead volume variance, which is the difference between standard hours and budgeted hours multiplied by standard fixed overhead rate.