Wangerin Corporation applies overhead to products based on machine-hours. The denominator level of activity is 6,900 machine-hours. The budgeted fixed manufacturing overhead costs are $240,810. In April, the actual fixed manufacturing overhead costs were $245,640 and the standard machine-hours allowed for the actual output were 7,200 machine-hours.Required:a. Compute the budget variance for April.b. Compute the volume variance for April.
What will be an ideal response?
a.
Budget variance = Actual fixed manufacturing overhead cost ? Budgeted fixed manufacturing overhead cost= $245,640 ? $240,810 = $4,830 U
b.
Fixed portion of the predetermined overhead rate= $240,810 ÷ 6,900 machine-hours = $34.90 per machine-hour
Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours ? Standard hours allowed)
= $34.90 per machine-hour × (6,900 machine-hours ? 7,200 machine-hours)
= $34.90 per machine-hour × (?300 machine-hours)
= $10,470 F
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