21. During February, the Web Company used a denominator activity of 80,000 machi

Question

21. During February, the Web Company used a denominator activity of 80,000 machine hours in computing its predetermined overhead rate. However, only 75,000 standard machine hours were allowed for the month’s actual production. If the overhead volume variance for February was $6,400 unfavorable, then the total budgeted fixed overhead cost for the month was:

                  A. $96,000

                  B. $102,400

                  C. $100,000

                  D. $98,600

                  E. Impossible to determine from the information given

Please Explain!

Explanation / Answer

For this question variance can be calculated as Fixed Overhead Volume variance=Fixed predetermined overhead Rate*(Denominator activity Hours-Standard Hours allowed) 6400= FPOR*(80000-75000) Fixed predetermined overhead Rate=FPOR FPOR 1.28 per hour Budgeted manufacturing Overhead= 1.28*80000 102400 Ans B $102400

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