The following information relates to Welty Manufacturing's overhead costs for the month
Static budget variable overhead $14,200
Static budget fixed overhead $5,600
Static budget direct labor hours 1,000 hours
Static budget number of units 5,000 units
Welty allocates manufacturing overhead to production based on standard direct labor hours.
Welty reported the following actual results for last month: actual variable overhead, $ 14,500; actual fixed overhead, $ $5,400; actual production of 4,700 units at 0.22 direct labor hours per unit. The standard direct labor time is 0.20 direct labor hours per unit.
Compute the fixed overhead volume variance.
What will be an ideal response
FOH volume variance = Budgeted FOH - Allocated FOH*
= $5,600 - $5,264
= $336 U
* Allocated FOH = $5.60** per DL Hr x 940*** DL Hr = $5,265
** Standard FOH allocation rate: Budgeted FOH / Budgeted allocation base
$5,600 / 1,000 DL Hr = $5.60 per DL Hr
*** 4,700 units produced x 0.20 standard direct labor hours per unit = 940 DL Hr
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