Question

Meridian Fashions uses standard costs for their manufacturing division. The allocation base for overhead costs is direct labor hours. From the following​ data, calculate the fixed overhead cost variance.

Actual fixed overhead $ 32,000
Budgeted fixed overhead $ 22,000
Standard overhead allocation rate $ 8
Standard direct labor hours per unit 2 DLHr
Actual output 2,300 units

Answer 1

Total Fixed Overhead Variance= 4800 + (10,000)= $ 5200 Unfavorable

Step-by-step explanation:

Actual fixed overhead $ 32,000

Budgeted fixed overhead $ 22,000

Standard overhead allocation rate $ 8

Standard direct labor hours per unit 2 DLHr

Actual output 2,300 units

Fixed Efficiency Variance

Actual Fixed Overhead = $ 32,000

Standard Hours Allowed * Fixed Overhead rate= 4600 *8= $ 36900

Fixed Efficiency Variance = $ 4800 Favorable

Idle Capacity Variance

Budgeted Fixed Overhead = $22000

Actual Fixed Overhead = $ 32000

Idle Capacity Variance = $ 10,000 Unfavorable

Total Fixed Overhead Variance= 4800 + (10,000)= $ 5200 Unfavorable

Answer 2

$10,000 Unfavorable

Step-by-step explanation:

Actual Fixed Overhead = $ 32,000

Budgeted Fixed Overhead = $ 22,000

Fixed Overhead variance = Actual fixed overhead – Budgeted fixed overhead

= $32,000 - $22,000

= $10,000 Unfavorable

This variance is unfavorable because the company spent more than it planned (budgeted)