Assume that ExxonMobil uses a standard cost system for each of its refineries. For the Houston refinery, the monthly fix...
Assume that ExxonMobil uses a standard cost system for each of its refineries. For the Houston refinery, the monthly fixed overhead budget is $8,000,000 for a planned output of 5,000,000 barrels. For September, the actual fixed cost was $8,750,000 for 5,100,000 barrels.
Required
a. Determine the fixed overhead budget variance.
b. If fixed overhead is applied on a per-barrel basis, determine the volume variance.
Provide formulas and an explanation.
Homework Answers
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Fixed overhead budget variance = Actual fixed overhead - Budgeted = 8,750,000 - 8,000,000 = 750,000 Unfavorable |
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Budgeted overhead rate per barrel = 8,000,000/5,000,000 = 1.60 Budgeted overhead for actual output = 1.60*5,100,000 = 8,160,000 Volume variance = 8,160,000-8,000,000 = 160,000 Favourable |
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