In addition to other costs, Fenwick Telephone Company planned to incur $475,200

Question

In addition to other costs, Fenwick Telephone Company planned to incur $475,200 of fixed manufacturing overhead in making 352,000 telephones. Fenwick actually produced 361,000 telephones, incurring actual overhead costs of $484,200. Fenwick establishes its predetermined overhead rate based on the planned volume of production (expected number of telephones). Determine whether sections B and C are favorable, unfavorable or neither.

Required:
a.

Calculate the predetermined overhead rate. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Predetermined overhead rate $ per unit

b.

Determine the total fixed cost spending variance and indicate the effect of the variance by selecting "Favorable", "Unfavorable", or "None" (No effect) (i.e., zero variance). (Input the amount as positive value. Leave no cell blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Total fixed cost spending variance

c.

Determine the total fixed cost volume variance and indicate the effect of the variance by selecting "Favorable", "Unfavorable", or "None" (No effect) (i.e., zero variance). (Input the amount as positive value. Leave no cell blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Total fixed cost volume variance

Explanation / Answer

(a) Predetermined overhead rate = $475,200/352,000 = $1.35/unit (b) Fixed cost spending variance = Budgeted fixed cost for budgeted output - Actual fixed cost for actual output = 475200 - 484200 = $9000 Unfavourable (c) Fixed cost volume variance = Standard Fixed cost for Actial output - Budgeted fixed cost for budgeted output = 361000 x 1.35 - 475200 = $12150 Favourable Hope this helps!

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