Happy Valley Pet Products uses a standard costing system that applies overhead to products based on standard direct labour-hours allowed for actual output of the period. During the recent year, the following data were collected: |
Total budgeted fixed overhead cost for the year | $ | 148,770 | |
Actual fixed overhead cost for the year | $ | 145,070 | |
Budgeted standard direct labour-hours | 26,100 | ||
Actual direct labour-hours | 27,600 | ||
Standard direct labour-hours allowed for the actual output | 24,100 | ||
Required: | |
1. |
Compute the fixed portion of the predetermined overhead rate for the year. (Round your answer to 2 decimal places.) |
2. |
Compute the fixed overhead budget and volume variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) |
1)
Predetermined overhead rate
= Total budgeted overhead / Standard direct labour hour allowed for actual output
= 148,770/24,100
= $6.17
2)
Fixed Overhead budget variance
= Actual fixed Overhead - Budgeted Overhead
= 145,070 - 148,770
= 3,700 Favourable as the actual overhead cost is less than the budgeted.
Fixed Overhead volume variance can be calculated from the budgeted and actual units produced, which is not given in the question and hence cannot be calculated.
Happy Valley Pet Products uses a standard costing system that applies overhead to products based on...
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