SCENARIO 3 FIXED MOH VARIANCE ANALYSIS Jenny’s Corporation manufactured 25,000 g

Question

SCENARIO 3 FIXED MOH VARIANCE ANALYSIS

Jenny’s Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March:

                                                                 Actual Static Budget

Production                                         25,000 units         24,000 units

Machine-hours                                   6,100 hours         6,000 hours

Fixed overhead costs for March             $123,000              $120,000

g.    What is March’s fixed overhead spending variance?

h.       What is March’s fixed overhead production-volume variance?

Explanation / Answer

fixed overhead spending variance   fixed overhead spending variance= Actual Fixed Overheads - Budgeted Fixed Overheads fixed overhead spending variance=123,000 -120,000 fixed overhead spending variance=3000 Adverse fixed overhead production-volume variance fixed overhead production-volume variance = Absorbed Fixed overheads-Budgeted Fixed Overheads fixed overhead production-volume variance = Actual Output x FOAR-Budgeted Fixed Overheads fixed overhead production-volume variance = 25000*5 - 120,000 fixed overhead production-volume variance = 5000 F Note = Rate = 120,000/24000 = 5

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