Acme Company\'s production budget for August is 17,500 units and includes the fo

Question

Acme Company's production budget for August is 17,500 units and includes the following component unit costs: direct materials, $8; direct labor, $10; variable overhead, $8. Budgeted fixed overhead is $32,000. Actual production in August was 18,000 units, actual unit component costs incurred during August include direct materials, $8.25; direct labor, $9.45; variable overhead, $6.82. Actual fixed overhead was $33,500, the standard fixed overhead application rate per unit consists of $2 per machine hour and each unit is allowed a standard of 1 hour of machine time. Required: Calculate the fixed overhead budget variance and the fixed overhead volume variance.

Explanation / Answer

volume variance = Budgeted overhead -applied overhead

                              = 32000 - [(17500*1) hours*2 per hour]

                            = 32000- [17500 *2]

                             = 32000 - 35000

                             = -3000 (F)

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