Question

Cholla Company’s standard fixed overhead rate is based on budgeted fixed manufacturing overhead of $22,200 and budgeted production of 30,000 units. Actual results for the month of October reveal that Cholla produced 28,000 units and spent $21,000 on fixed manufacturing overhead costs.

Calculate Cholla’s fixed overhead rate and the fixed overhead volume variance. (Round "Fixed Overhead Rate" to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Answer 1

$0.74 per unit ; $1480 (Unfavorable)

Step-by-step explanation:

Given that,

Budgeted fixed manufacturing overhead = $22,200

Budgeted production = 30,000 units

Cholla produced = 28,000 units

Fixed manufacturing overhead costs = $21,000

Fixed Overhead Rate:

= Budgeted fixed manufacturing overhead ÷ Budgeted production

= $22,200 ÷ 30,000 units

= $0.74 per unit

Fixed Overhead Volume Variance:

= (Actual Output - Budgeted Production) × Standard (Fixed) Overhead Rate

= (28,000 - 30,000) × $0.74

= $1480 (Unfavorable)