5.6 Review - Fixed Manufacturing Overhead Variances in Cost Centers

If the actual amount spent for fixed manufacturing overhead is less than the budgeted amount, the result is:

A favorable fixed overhead budget variance

If the budgeted amount for fixed manufacturing overhead is less than the standard hours allowed for the actual output times the standard rate, the result is:

A favorable volume variance

If the actual amount spent for fixed manufacturing overhead is greater than the budgeted amount, the result is:

An unfavorable fixed overhead budget variance

If the budgeted amount for fixed manufacturing overhead is greater than the standard hours allowed for the actual output times the standard rate, the result is:

An unfavorable volume variance

The following information is given for Roe Company: Actual fixed manufacturing overhead $200,000 Budgeted fixed manufacturing overhead $190,000 Actual production 600 Budgeted production 500 Standard direct labor hour per unit 4 Fixed manufacturing overhead is applied to production based on direct labor hours. Using the data above, compute the volume variance.

Budgeted hours: 500 units x 4 hours = 2,000 hours Fixed manufacturing overhead application rate: $190,000 x (2,000) = $95 Hours allowed for actual production: 600 units x 4 hours = 2,400 hours Volume variance: (2,000 budgeted hours - 2,400 allowed hours) x $95 = $38,000 F Alternative computation: Standard fixed manufacturing overhead rate: $190,000 x 500 units = $380 Volume variance: (600 actual units - 500 budgeted units) x $380 = $38,000 Favorable

The following data is known for Carlin, Inc.: Budgeted variable manufacturing overhead $ 54,000 Budgeted fixed manufacturing overhead $162,000 Budgeted production 18,000 units Budgeted direct labor hours 27,000 units Budgeted direct labor hours per unit 1.5 hours Actual variable manufacturing overhead $ 68,250 Actual fixed manufacturing overhead $148,000 Actual production 20,000 units Actual direct labor hours 32,500 Standards: Variable manufacturing overhead: 1.5 direct labor hours x $2 = $3 per unit Fixed manufacturing overhead: 1.5 direct labor hours x $6 = $9 per unit Using the information above, compute the fixed manufacturing overhead budget variance for Carlin, Inc.

Fixed manufacturing overhead budget variance: $162,000 - $148,000 = $14,000 Favorable

The following information is given for Roe Company: Actual fixed manufacturing overhead $200,000 Budgeted fixed manufacturing overhead $190,000 Actual production 600 Budgeted production 500 Standard direct labor hour per unit 4 Fixed manufacturing overhead is applied to production based on direct labor hours. Using the data above, compute the fixed manufacturing overhead budget variance.

Fixed overhead budget variance: $190,000 - $200,000 = $10,000 Unfavorable

Medina Sports manufactures snowboards. Medina had budgeted 25 direct labor hours per unit and projected that 2,120 units would be produced. The budgeted fixed manufacturing overhead costs were $530,000. The actual overhead costs for the year were $544,000 and 2,150 units were produced. What is the fixed overhead budget variance?

Fixed overhead budget variance: $530,000 - $544,000 = 14,000 Unfavorable

The following data is known for Carlin, Inc.: Budgeted variable manufacturing overhead $ 54,000 Budgeted fixed manufacturing overhead $162,000 Budgeted production 18,000 units Budgeted direct labor hours 27,000 units Budgeted direct labor hours per unit 1.5 hours Actual variable manufacturing overhead $ 68,250 Actual fixed manufacturing overhead $148,000 Actual production 20,000 units Actual direct labor hours 32,500 Standards: Variable manufacturing overhead: 1.5 direct labor hours x $2 = $3 per unit Fixed manufacturing overhead: 1.5 direct labor hours x $6 = $9 per unit Using the information above, compute the volume variance for Carlin, Inc.

Hours allowed for actual production: 20,000 units x 1.5 hours = 30,000 hours Volume variance: (30,000 allowed hours - 27,000 budgeted hours) x $6 = $18,000 F Alternative computation: (20,000 actual units - 18,000 budgeted units) x $9 = $18,000 Favorable

Which of the following would NOT be part of total over- or underapplied manufacturing overhead?

Sales volume variance

Medina Sports manufactures snowboards. Medina had budgeted 12.5 direct labor hours per unit and projected that 2,120 units would be produced. The budgeted fixed manufacturing overhead costs were $530,000. The actual overhead costs for the year were $544,000 and 2,150 units were produced. What is the volume variance?

Standard rate: $530,000 / (2,120 units x 12.5 hours) = $20 Budgeted hours: 2,120 x 12.5 = 26,500 hours Hours allowed for actual production: 2,150 x 12.5 = 26,875 hours Volume variance: (26,875 - 26,500) x $20 = $7,500 F Alternative computation: Standard fixed manufacturing overhead rate: $530,000 / 2,120 units = $250 Volume variance: (2,120 budgeted units - 2,150 actual units) x $250 = $7,500 Favorable

Which variance is NOT considered to be an input variance?

Volume Variance

Which of the following is a component of the fixed manufacturing overhead budget variance and the volume variance?

~Actual fixed manufacturing overhead costs ~Fixed manufacturing overhead budget ~Standard fixed manufacturing overhead rate ~ALL OF THESE ARE COMPONENTS