Question

An outdoor barbecue grill manufacturer uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 4,600MHs Fixed overhead cost$50,140 The following data pertain to operations for the most recent period: Actual hours 5,000MHs Standard hours allowed for the actual output 4,743MHs Actual total fixed manufacturing overhead cost$48,690 The fixed manufacturing overhead volume variance for the period is closest to:

Answer 1

Answer:

Fixed overhead volume variance $ 2801.3

Explanation:

The difference between budgeted Fixed Overheads and Applied Fixed Overheads gives the Fixed overhead volume variance.

Given Data

(Planned )Denominator level of activity 4,600MHs

Fixed overhead cost$50,140

Actual hours 5,000MHs

Standard hours allowed for the actual output 4,743MHs

Actual total fixed manufacturing overhead cost$48,690

We need Budgeted Fixed overhead and we can find it by dividing the fixed costs by the denominator level of activity and multiplying it with actual hours.

We  also need  to find Applied Fixed overhead  by dividing the fixed costs by the denominator level of activity and multiplying it with  standard  hours for actual output.

Calculations

Budgeted Fixed Overhead= ($50,140 /4,600MHs )* 5,000MHs

                                              = $ 54,500

Applied Fixed overhead= ($50,140 /4,600MHs )* 4743MHs

                                         = $ 51698.7

Formula

Fixed overhead volume variance=Budgeted Fixed overhead- Applied Fixed overhead

Fixed overhead volume variance= $ 54,500- $ 51698.7= $ 2801.3