Question

The following information for the past year is available from Thinnews Co., a company that uses machine hours to apply standard factory overhead cost to outputs:

Actual total factory overhead cost incurred	$24,000
Actual fixed overhead cost incurred	$10,000
Budgeted fixed overhead cost	$11,000
Actual machine hours	5,000
Standard machine hours allowed for the units manufactured	4,800
Denominator volume—machine hours	5,500
Standard variable overhead rate per machine hour	$3.00

1.) Under a three-variance breakdown (decomposition) of the total factory overhead variance, the fixed factory overhead production-volume variance (to the nearest whole dollar) is:

Answer 1

fixed factory overhead production-volume variance = Standard fixed overhead per machine hour x (Standard machine hours - dominator machine volume machine hours)

= ($11000/5500) x ($4800 - 5500)

= -$1400 Unfavorable