Question

The predetermined overhead rate for Waterway Industries is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $10064 variable and $6120 fixed, and 1700 units were produced. The direct labor standard is 2 hours per unit produced. The total overhead variance is

Answer 1

Total Fixed Overhead Variance 679.67$ favorable

Step-by-step explanation:

Waterway Industries

Actual fixed overhead $ 6120

Budgeted fixed overhead $ (50000/ 15000)* 1700= $5667

Allocated fixed overhead $ 1700* 2*2= $6800

Standard overhead allocation rate $5

Standard direct labor hours per unit 2 DLHr

Normal capacity DLH= 30000

Normal Capacity Units= 30,000/2= 15,000

Actual output 1700 units

Total Fixed Overhead Variance = Budget Variance + Volume Variance

=$ 453.33 unfavorable - $ 1133 favorable = 679.67$ favorable

Budget Variance = Actual Fixed Overhead- Budgeted Fixed Overhead= $ 6120- $ 5667= $ 453.33 unfavorable

Volume Variance = Budgeted Fixed Overhead- Allocated Fixed Overhead

Volume Variance= $ 5667- 6800

Volume Variance= $ 1133 favorable