Question

Zotta Enterprises uses standard costing and applies manufacturing overhead cost to products on the basis of standard direct labor-hours (DLHs). Budgeted and actual data relating to manufacturing overhead for last year appear below:

Actual fixed manufacturing overhead cost	$	38,900
Denominator activity		20,000	DLHs
Standard hours allowed for one unit		1.2	DLHs
Units produced		17,000	units
Fixed overhead budget variance	$	1,300	Unfavorable

The volume variance was: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

A)$5,640 U

B)$5,640 F

C)$752 U

D)$752 F

Answer 1

Ans.	Option    D     $752   favorable
	Fixed overhead budget variance = Actual fixed overhead - Budgeted fixed overhead
	$1,300 = $38,900 - Budgeted fixed overhead
	Budgeted fixed overhead   = $38,900 - $1,300
	$37,600
	Budgeted overhead rate = Budgeted fixed overhead / Budgeted labor hours
	$37,600 / 20,000
	$1.88	per direct labor hour
	Standard labor hours = Standard hours allowed per unit * Units produced
	1.2 * 17,000
	20400	direct labor hours
	Fixed overhead volume variance = (Standard machine hours * Budgeted overhead rate) - Budgeted fixed overhead
	(20,400 * $1.88) - $37,600
	$38,352 - $37,600
	752	Favorable