In addition to other costs, Grosha Telephone Company planned to incur $600,000 of fixed manufacturing overhead...

In addition to other costs, Grosha Telephone Company planned to incur $600,000 of fixed manufacturing overhead in making 500,000 telephones. Grosha actually produced 508,000 telephones, incurring actual overhead costs of $599,400. Grosha establishes its predetermined overhead rate based on the planned volume of production (expected number of telephones).

Required

A. Calculate the predetermined overhead rate. (Round your answer to 2 decimal places.)

B. Determine the fixed cost spending variance and indicate whether it is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

C. Determine the fixed cost volume variance and indicate whether it is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

a.	Predetermined overhead rate	per unit
b.	Total fixed cost spending variance
c.	Total fixed cost volume variance

Solutions

Expert Solution

a) Predetermined overhead rate = Estimated manufacturing overhead cost / Estimated total units in the allocation based

Predetermined overhead rate = 600,000 / 500,000 = 1.2 perunit

b) Total fixed cost spending variance = Actual fixed overhead cost - Estimated overhead cost

= 599,400 - 600,000

= 600 (F) Favourable

c) Total fixed cost volume variance = Actual fixed overheads - Estimated fixed overheads

Actual fixed overheads = Estimated fixed overhead rate * Actual units produced

= 1.2 * 508,000 = $609,600

Total fixed cost volume variance =$ 609,600 - $600,000 = $9600 (F) Favourable

ekkarill92 answered 1 year ago

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