Donovan Company incurred the following costs while producing 500 units: Direct Materials, $10 per unit; Direct Labor, $25 per un
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Answer:
$9000 (unfavorable).
Explanation:
Given: Budgeted fixed overhead= $360000.
Actual fixed overhead=$ 360000.
Actual production= 11,700 units.
The variable overhead rate was $3 per hour.
The standard hours for production were 5 hours per unit.
The fixed factory overhead volume variance is difference between actual production volume and budgeted production. It help in measuring the effecient use of fixed resources. It is termed as favourable if actual fixed overhead exceed the budgeted amount, however, it is unfavorable if the actual fixed overhead is less than budgeted amount.
Now, lets calculate the Actual fixed overhead cost.
Actual fixed overhead cost=
∴ Actual fixed overhead cost=
Actual fixed overhead cost= $351000.
Next calculating the fixed factory overhead volume variance.
The fixed factory overhead volume variance=
We know, Budgeted fixed overhead= $360000 and Actual fixed overhead cost= $351000
∴ The fixed factory overhead volume variance=
The fixed factory overhead volume variance= $9000 (unfavorable)