Question

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AirPro Corp. reports the following for November.
Actual total factory overhead incurred $28,175
Standard factory overhead:
Variable overhead 3.10 per unit produced
Fixed overhead
($12,000/12,000 predicted units to be produced) $ 1.00 per unit
Predicted units to produce 12,000 units
Actual units produced 9,800 units
Required:
1. Compute the overhead volume variance for November and classify it as favorable or unfavorable.

Answer 1

The overhead volume variance for November is $6,820, and it is unfavorable.

Step-by-step explanation:

The overhead volume variance can be calculated by multiplying the standard overhead rate per unit by the difference between the predicted units and actual units produced. In this case, the standard variable overhead rate is $3.10 per unit. The difference between the predicted units (12,000) and actual units produced (9,800) is 2,200 units. Therefore, the overhead volume variance is $3.10 * 2,200 units = $6,820.

The overhead volume variance is unfavorable because it represents the difference between the standard cost of the overhead and the actual cost incurred. In this case, the actual cost of the overhead is higher than the standard cost, indicating that more overhead was incurred than anticipated.

Answer 2

Step-by-step explanation:

Answer:

It is $2,205 (Favorable)

Step-by-step explanation:

Standard Fixed Overhead Rate (SFOR)= $ 1.00

Applied Fixed Overhead(AFO) = Standard Fixed Overhead Rate × Standard Hours Allowed per unit

AFO per unit = $ 1.00 * 3.10

=$ 3.10

Fixed Overhead Volume Variance(FOVV) = Applied Fixed Overhead(AFO) – Budgeted Fixed Overhead(BFO).

FOVV = ( $ 3.10 * 9,800) -$28,175

=$2,205 (Favorable)