Question

Fixed Overhead Spending and Volume Variances, Columnar and Formula Approaches.

Branch Company provided the following information:

Standard fixed overhead rate (SFOR) per direct labor hour $5.00
Actual fixed overhead $305,000
BFOH $300,000
Actual production in units 16,000
Standard hours allowed for actual units produced (SH) 64,000

Required:
a. Calculate the fixed overhead spending and volume variances.
b. Calculate the fixed overhead spending variance.
c. Calculate the total fixed overhead variance.

Answer 1

a. Fixed overhead spending variance:

= Actual fixed overhead - Budgeted Flexible overhead

= 305,000 - 300,000

= $5,000 Unfavorable

Fixed overhead volume variance:

= (Standard fixed overhead rate (SFOR) per direct labor hour * Standard hours allowed for actual units produced ) - Budgeted Flexible overhead

= (5 * 64,000) - 300,000

= $20,000 favorable

b. Fixed overhead spending variance:

= Actual fixed overhead - Budgeted Flexible overhead

= 305,000 - 300,000

=$5,000 Unfavorable

c. Fixed overhead variance:

= (Standard fixed overhead rate (SFOR) per direct labor hour * Standard hours allowed for actual units produced ) - Actual fixed overhead

= (5 * 64,000) - 305,000

= $15,000 favorable