Baltimore Products has an estimated practical capacity of 90,000 machine hours, and each unit requires two machine hours. The following data apply to a recent accounting period:

Actual fixed overhead $ 442,000

Actual machine hours worked 86,000

Actual finished units produced 43,000

Budgeted fixed overhead $450,000

Baltimore's fixed overhead spending and production volume variance are:

(A) $ 8,000 unfavorable and $ 20,000 unfavorable, respectively

(B) $ 8,000 favorable and $ 20,000 unfavorable, respectively

(C) $ 12,000 favorable and $ 20,000 unfavorable, respectively

(D) $ 12,000 unfavorable and $ 20,000 unfavorable, respectively

Question

Business

Levi Keith

27 October, 21:04

Baltimore Products has an estimated practical capacity of 90,000 machine hours, and each unit requires two machine hours. The following data apply to a recent accounting period:

Actual fixed overhead $ 442,000

Actual machine hours worked 86,000

Actual finished units produced 43,000

Budgeted fixed overhead $450,000

Baltimore's fixed overhead spending and production volume variance are:

(A) $ 8,000 unfavorable and $ 20,000 unfavorable, respectively

(B) $ 8,000 favorable and $ 20,000 unfavorable, respectively

(C) $ 12,000 favorable and $ 20,000 unfavorable, respectively

(D) $ 12,000 unfavorable and $ 20,000 unfavorable, respectively

+4

Answers (1)

Know the Answer?

Kevin Gilmore · Answer 1

Option "C" is the correct answer to the following statement.

Explanation:

Computation:

Fixed overhead spending = Actual fixed overhead - Budgeted fixed overhead

= $442,000 - $450,000

= - $8,000

$8000 Favorable

Budgeted overhead rate per unit = Budgeted fixed overhead / Total Budgeted machine hours

= $450,000 / 90,000 = $5

Budgeted units = Total Budgeted machine hours / number of hours per unit required

= 90,000 / 2 = 45,000 units

Production volume variance = (Actual units - Budgeted units) * Budgeted overhead rate per unit * number of hours per unit required

= (43,000 - 45,000) * $5 * 2

= - $20,000

$20,000 Unfavorable