Question

Fixed manufacturing overhead was budgeted at $105,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $4,000 unfavorable and the fixed overhead spending variance was $1,500 favorable, fixed manufacturing overhead applied must be a.$106,500. b.$109,000. c.$101,500. d.$101,000.

Answer 1

b. $109,000

Step-by-step explanation:

Manufacturing overhead applied rate is calculated by dividing the budgeted overhead by the budgeted level of activity on which the overhead is applied. It is a rate at which the overhead is applied to a product / project/ department.

Manufacturing overhead applied rate = Budgeted overhead / Budgeted activity

Manufacturing overhead applied rate = Budgeted overhead / Budgeted direct labor hours

Predetermined overhead rate = $105,000 / 25,000

Predetermined overhead rate = $4.2 per direct labor hour

Volume Variance = (Actual overhead - Budgeted Variance ) x Standard Rate

$4000 = Actual overhead at Standard Rate - $105,000

Actual overhead at Standard Rate = $105,000 + $4,000 = $109,000