Question

Rostad Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below:
Original Budget Actual Costs
Variable overhead costs:
Supplies $6,500        $6,690       
Indirect labor 10,590        9,940       
  
Fixed overhead costs:
Supervision 14,310        14,360       
Utilities 13,600        13,650       
Factory depreciation 57,230        57,130       
Total overhead costs $102,230        $101,770       

The company based its original budget on 6,600 machine-hours. The company actually worked 6,560 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,490 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? (Round your intermediate calculations to 2 decimal places.)

a. $1,323 favorable
b. $1,419 unfavorable
c. $1,419 favorable
d. $1,323 unfavorable

Answer 1

Answer:

b. $1,419 unfavorable

Explanation:

The computation of the fixed manufacturing overhead volume variance is shown below:-

Fixed manufacturing overhead volume variance = Budgeted fixed overhead - standard fixed overhead

First we compute the computing the Budgeted Fixed overhead and Standard fixed overhead

Budgeted Fixed overhead = $14,310 + $13,600 + $57,230

= $85,140

Standard fixed overhead = Standard hours allowed for actual output × Overhead rate

= $6,490 × ($85,140 ÷ $6,600)

= $83,721

Now, we will put it into formula of Fixed manufacturing overhead volume variance =

$85,140 - $83,721

= $1,419 Unfavorable