Question

Fletcher Company collected the following data regarding production of one of its products. Compute the fixed overhead cost variance. Direct labor standard (2 hrs. a $12.75/hr) $25.50 per finished unit 81,500 hrs. Actual direct labor hours 42,000 units Budgeted units Actual finished units produced 40,000 units Standard variable OH rate (2 hrs. $14.30/hr.) $28.60 per finished unit Standard fixed OH rate ($336,000/42,000 units) $8.00 per unit $1140,000 Actual cost of variable overhead costs incurred $338,000 Actual cost of fixed overhead costs incurred
a. $18,000 favorable.
b. $18.300 favorable
c. $18,000 unfavorable.
d. $18.300 unfavorable
e. $14.300 unfavorable.

Answer 1

Answer:

Option c is correct

 Fixed overhead cost variance  = $18,000 unfavorable

Explanation:

The fixed overhead costs variance is the difference between the absorbed overheads and actual fixed cost incurred

Absorbed fixed overhead =FOAR × actual output

FOAR - fixed overhead absorption rate = $8.00 per unit

Absorbed overhead = $8.00 per unit   × 40,000 =  $320000

Actual overhead cost                                                  $338,000

Fixed overhead cost variance                                   $18,000 unfavourable