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7 July, 19:39

Meridian Fashions uses standard costs for their manufacturing division. The allocation base for overhead costs is direct labor hours. From the following data, calculate the fixed overhead cost variance.

Actual fixed overhead $ 32,000

Budgeted fixed overhead $ 22,000

Standard overhead allocation rate $ 8

Standard direct labor hours per unit 2 DLHr

Actual output 2,300 units

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  1. 7 July, 20:09
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    Total Fixed Overhead Variance = 4800 + (10,000) = $ 5200 Unfavorable

    Explanation:

    Actual fixed overhead $ 32,000

    Budgeted fixed overhead $ 22,000

    Standard overhead allocation rate $ 8

    Standard direct labor hours per unit 2 DLHr

    Actual output 2,300 units

    Fixed Efficiency Variance

    Actual Fixed Overhead = $ 32,000

    Standard Hours Allowed * Fixed Overhead rate = 4600 * 8 = $ 36900

    Fixed Efficiency Variance = $ 4800 Favorable

    Idle Capacity Variance

    Budgeted Fixed Overhead = $22000

    Actual Fixed Overhead = $ 32000

    Idle Capacity Variance = $ 10,000 Unfavorable

    Total Fixed Overhead Variance = 4800 + (10,000) = $ 5200 Unfavorable
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