Plantier Incorporated makes a single product--a cooling coil used in commercial refrigerators. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. The budgeted fixed manufacturing overhead for the year was $136,950 and the budgeted hours were 27,500 machine-hours. Data concerning the actual results for the most recent year appear below:?Applying Overhead:???Actual production (a)27,000units?Standard hours per unit (b)1.10machine-hours?Standard hours allowed for the actual production (a) × (b)29,700machine-hours?????Actual fixed manufacturing overhead$154,950??Actual hours28,300machine-hoursRequired:a. Determine the fixed overhead budget variance for

Question

the year.b. Determine the fixed overhead volume variance for the year.

What will be an ideal response?

Answer 1

a. Budget variance = Actual fixed overhead ? Budgeted fixed overhead
= $154,950 ? $136,950 = $18,000 U

b. Fixed component of the predetermined overhead rate = $136,950/27,500 machine-hours
= $4.98 per machine-hour
Volume variance = Budgeted fixed overhead ? Fixed overhead applied to work in process
= $136,950 ? ($4.98 per machine-hour × 29,700 machine-hours)
= $136,950 ? ($147,906)
= $10,956 F
or
Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours ? Standard hours allowed for the actual output)
= $4.98 per machine-hour x (27,500 machine-hours ? 29,700 machine-hours)
= $4.98 per machine-hour x (27,500 machine-hours ? 29,700 machine-hours)
= $4.98 per machine-hour x (-2,200 hours)
= $10,956 F