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29 December, 11:17

Radon Corporation manufactured 33,000 grooming kits for horses during March. The company uses machine hour to allocate fixed manufacturing overhead. The following fixed overhead data pertain to March:

Actual Static Budget

Production 33,000 units 30,000 units

Machine-hours 6,600 hours 6,000 hours

Fixed Overhead Costs for March $153,000 $144,000

1. What is the fixed overhead production-volume variance? (HINT: The answer is $14,400 favorable, but I need work to support this)

2. What is the fixed overhead spending variance? (HINT: The answer is $9,000 unfavorable, but I need work to support this)

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Answers (1)
  1. 29 December, 13:10
    0
    1) The fixed overhead production-volume variance is $14400 favourable.

    2) The fixed overhead spending variance is $9000 unfavourable.

    Explanation:

    1)

    Fixed overhead production volume variance

    = amount applied * amount budgeted

    = 144000/30000

    = 4.80 per unit

    = 4.80*33000 - 144000

    = $14400 favourable

    Therefore, The fixed overhead production-volume variance is $14400 favourable.

    2)

    fixed overhead spending variance

    = actual overhead - budgeted overhead

    = 153000 - 144000

    = $9000 unfavourable

    Therefore, The fixed overhead spending variance is $9000 unfavourable.
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