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

Question

Business

Elyse Durham

10 November, 02:09

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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Isabel Grimes · Answer 1

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