Maxwell Company uses a standard cost accounting system and applies manufacturing overhead to products on the basis of machine hours. The following information is available for the year just ended:
Standard variable overhead rate per hour: $2.50
Standard fixed overhead rate per hour: $4.00
Planned activity during the period: 20,000 machine hours
Actual production: 10,700 finished units
Machine-hour standard: Two completed units per machine hour
Actual variable overhead: $55,440
Actual total overhead: $155,900
Actual machine hours worked: 23.100
Required:
1. Calculate the budgeted fixed overhead for the year.
2. Compute the variable-overhead spending variance.
3. Calculate the company’s fixed-overhead volume variance.
4. Did Maxwell spend more or less than anticipated for fixed overhead? How much?
5. Was variable overhead underapplied or overapplied during the year? By how much?
6. On the basis of the data presented, does it appear that Maxwell suffered a lengthy strike during the year by its production workers? Briefly explain.
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