1 October, 08:26

# 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.

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1. 1 October, 08:59
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b. \$109,000

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 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