Question

20) Radon Corporation manufactured 33,000 grooming kits for horses during March. The following fixed overhead data pertain to March:

Actual Static Budget
Production 33,000 units 30,000 units
Machine-hours 6,100 hours 6,000 hours
Fixed overhead costs for March $153,000 $144,000

What is the fixed overhead production-volume variance?
A) $9,000 unfavorable
B) $14,400 favorable
C) $14,400 unfavorable
D) $9,000 favorable

21) What is the fixed overhead spending variance?
A) $14,400 favorable
B) $9,000 favorable
C) $9,000 unfavorable
D) $14,400 unfavorable

Answer 1

The fixed overhead production-volume variance is $14,400 unfavorable. The fixed overhead spending variance is $9,000 unfavorable.

Step-by-step explanation:

The fixed overhead production-volume variance is calculated by subtracting the budgeted fixed overhead cost from the actual fixed overhead cost and multiplying it by the difference between the actual and budgeted production volume. In this case, the budgeted fixed overhead cost is $144,000, the actual fixed overhead cost is $153,000, and the difference between the actual and budgeted production volume is 3,000 units. Therefore, the fixed overhead production-volume variance is $14,400 unfavorable.

The fixed overhead spending variance is calculated by subtracting the budgeted fixed overhead cost from the actual fixed overhead cost. In this case, the budgeted fixed overhead cost is $144,000 and the actual fixed overhead cost is $153,000. Therefore, the fixed overhead spending variance is $9,000 unfavorable.