Question

Bekits Corporation manufactured 37,500 grooming kits for horses during March. The following fixed overhead data relates to March:

Actual Static Budget
Production 37,500 units 36,000 units
Machine-hours 6,100 hours 5,940 hours
Fixed overhead costs for March $133,000 $124,740

7) What is the flexible-budget amount?
A) $134,375.50
B) $124,740.00
C) $129,937.50
D) $133,000.00

8) What is the amount of fixed overhead allocated to production?
A) $134,375.50
B) $124,740.00
C) $133,000.00
D) $129,937.50

9) What is the fixed overhead spending variance?
A) $3,062.5 unfavorable
B) $8,260 favorable
C) $8,260 unfavorable
D) $3,062.5 favorable

Answer 1

To calculate the flexible-budget amount, the variable overhead rate is required. Fixed overhead allocated to production is the same as the fixed overhead costs. The fixed overhead spending variance is $8,260 favorable.

Step-by-step explanation:

To find the flexible-budget amount, we use the formula:

Flexible-budget amount = Static Budget + (Actual Production - Static Budget) x Variable Overhead Rate

In this case, the static budget is $124,740, the actual production is 37,500 units, and the variable overhead rate is not given. Without the variable overhead rate, it is not possible to calculate the flexible-budget amount. Therefore, the answer is not provided.

The amount of fixed overhead allocated to production is always the same as the fixed overhead costs for a given period. In this case, the fixed overhead allocated to production is $133,000.

The fixed overhead spending variance is calculated using the formula:

Fixed Overhead Spending Variance = Actual Fixed Overhead - Budgeted Fixed Overhead

Substituting the values, we get:

Fixed Overhead Spending Variance = $133,000 - $124,740 = $8,260

Therefore, the fixed overhead spending variance is $8,260 favorable.