Question

Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: $ 481,600 472,000 56,000 57,000 54,000 Total budgeted fixed overhead cost for the year Actual fixed overhead cost for the year Budgeted direct labor-hours (denominator level of activity) Actual direct labor-hours Standard direct labor-hours allowed for the actual output Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.) 2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for scc favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) 1 Fixed portion of the predetermined overhead rate per DLH 2 Budget variance Volume variance

Answer 1

Answer

• Requirement 1
  Fixed Portion of predetermined overhead rate = $ 481600 / 56000 budgeted DLHs
  = $ 8.60 per DLH
• Requirement 2

Budget Variance = $ 9600 Favourable

Volume Variance = $ 17200 Unfavourable

Fixed Overhead Production Budget Variance
(	Budgeted Fixed Overhead	-	Actual Fixed Overhead incurred	)
(	$                   481,600.00	-	$          472,000.00	)
	9600
	Variance		$              9,600.00			Favourable-F

Fixed Overhead Production Volume Variance
(	Standard Fixed Overhead or Fixed Overhead absorbed = 54000 DLH x $ 8.60	-	Budgeted Fixed Overhead	)
(	$                   464,400.00	-	$          481,600.00	)
	-17200
	Variance		$            17,200.00			Unfavourable-U