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: $ 426,400 $ 420,400 52,000 53,000 50,000 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 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

1)	Fixed overhead (a)	$426400
	Budgeted Std Labour hrs (b)	52000
	Fixed portion of the predetermined overhead rate c=a/b	$8.20
2)	Budget Variance
	Actual fixed overhead cost for the year (d)	$    420,400
	Budgeted fixed overhead cost (e)	$    426400
	Budget variance f =e-d	$          (6,000)	(F)
	Volume Variance
	Budgeted fixed overhead cost (e)	$    426,400
	Applied fixed OH= Actual fixed overhead /Actual Hrs)*Std Hrs (g)	$    396604
	=$420400/53000*50000
	Volume Variance h= e-g	$ 29,796	(F)