Question

Radon Corporation manufactured 42,000 grooming kits for horses during March. The following fixed overhead data pertain to March:

	Actual	Static budget
Production	42,000 units	39,000 units
Machine hours	15,700 hours	15,600 hours
fixed overhead costs for March	$336,800	$327,600

What is the fixed overhead production-volume variance?

Answer 1

Standard Fixed Overhead Per hour = $327600/15600 Hours
		=$21 per hour
Standard Hours Allowed For Actual Production = 15600 hours /39000 units *42000 units
		=16800 hours
Fixed Overhead Volume Variance = Standard Rate Per hour * (Standard Hours Allowed For Actual Production - Budgeted Hours)
		=$21* (16800 hours -15600 hours )
		=$25200 (favorable)