Question

odarta Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's predetermined overhead rate for fixed manufacturing overhead is $1.20 per machine-hour and the denominator level of activity is 6,600 machine-hours. In the most recent month, the total actual fixed manufacturing overhead was $8,340 and the company actually worked 6,400 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,480 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month

Answer 1

$144 unfavorable

Step-by-step explanation:

The computation of the overall fixed manufacturing overhead volume variance for the month is shown below:

But before that following calculations need to be done

Budgeted manufacturing overhead is

= 6600 × $1.20

= $7,920

And,

Manufacturing overhead applied is

= Standard hours × Predetermined overhead rate

= 6480 × $1.20 = $7,776

So, fixed manufacturing overhead volume variance is

= Fixed overhead applied - budgeted fixed overhead

= $7,776 - $7,920

= $144 unfavorable