Asked by Massiel Toribio Peralta on Jul 05, 2024
Verified
Lossing Corporation applies manufacturing overhead to products on the basis of standard machine-hours.Budgeted and actual overhead costs for the most recent month appear below: The company based its original budget on 5,100 machine-hours.The company actually worked 4,800 machine-hours during the month.The standard hours allowed for the actual output of the month totaled 4,980 machine-hours.What was the overall fixed manufacturing overhead volume variance for the month?
A) $3,150 Unfavorable
B) $3,150 Favorable
C) $1,260 Unfavorable
D) $1,260 Favorable
Fixed Manufacturing Overhead
The consistent, non-variable costs incurred during the manufacturing process, not directly tied to production levels.
Volume Variance
The difference between the budgeted and actual volume of production, affecting fixed costs allocation.
Machine-Hours
A unit of measure representing the operation time of a machine, often used in allocating manufacturing costs based on machine usage.
- Evaluate and interpret the differences between budgeted and actual fixed manufacturing overheads in terms of volume.
Verified Answer
Budgeted variable manufacturing overhead costs / Budgeted machine-hours = $17,850 / 5,100 = $3.50 per machine-hour
Next, we can calculate the total variable manufacturing overhead variance:
Actual machine-hours * (Standard rate - Actual rate) = 4,800 * ($3.50 - $3.60) = $480 Unfavorable
Then, we can calculate the fixed manufacturing overhead volume variance:
Budgeted fixed manufacturing overhead - (Standard rate * Standard hours allowed) = $12,150 - ($3.50 * 4,980) = $1,260 Unfavorable
Therefore, the answer is C, $1,260 Unfavorable.
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $53,550 - (4,980 machine-hours × $10.50 per machine-hour)
= $53,550 - $52,290
= $1,260 U
Learning Objectives
- Evaluate and interpret the differences between budgeted and actual fixed manufacturing overheads in terms of volume.
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