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Point Company uses the standard costing method. The company's product normally takes 0.25 hour to produce....

Point Company uses the standard costing method. The company's product normally takes 0.25 hour to produce. Normal annual capacity is 3,000 direct labor hours, and budgeted fixed overhead costs for the year were $6,750. During the year, the company produced and sold 8,000 units. Actual fixed overhead costs were $4,800. Compute the fixed overhead volume variance.

$300 F

$300 U

$1,950 U

$2,250 U

Solutions

Expert Solution

WORKING NOTES:
Budgeted Capacity Recovery Rate Per unit
Hrs Avaialble Hrs. Required Per unit Budgeted Production Capacity (Units) Budgeted Fixed Overheaad Costs "/" By Budgeted Production = Fixed overhead Recvery Rate
3000 0.25 12000 6750 "/" By 12000 = 0.5625
Hrs (3000 / 0.25 Hrs) Units Per Unit
Solution:
Fixed Overhead volume Variance = Absrobed Fixed Overhead "-" Budgeted Fixed Overhead
Fixed Overhead volume Variance = Actual Output   X FOVH recovery Rate   "-" Budgeted Output X FOVH recovery Rate  
(Units )
Fixed Overhead volume Variance = $                       8,000 X $                   0.5625 "-" $                   12,000 X $                   0.5625
Fixed Overhead volume Variance = $                       4,500 - $                      6,750
Fixed Overhead volume Variance = $                       2,250 Unfavorable  
Answer = Option 4 = $ 2,250 U

ekkarill92 answered 2 years ago
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