Primara Corporation has a standard cost system in which it applies overhead to p
ID: 2491971 • Letter: P
Question
Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:
Total budgeted fixed overhead cost for the year
$515,900
Actual fixed overhead cost for the year
$509,000
Budgeted standard direct labor-hours (denominator level of activity)
67,000
Actual direct labor-hours
68,000
Standard direct labor-hours allowed for the actual output
65,000
Required:
1.
Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.)
Fixed overhead
Denominator level of activity
Fixed portion of the predetermined overhead rate
2.
Compute the fixed overhead budget variance and volume variance. (Round Fixed portion of the predetermined overhead rate to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.))
Budget Variance
Actual fixed overhead cost for the year
Budgeted fixed overhead cost
Budget variance
Volume Variance
Fixed portion of the predetermined overhead rate
DLH
Denominator hours
DLHs
Standard hours allowed
DLHs
Volume variance
Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:
Explanation / Answer
Answer:1
Fixed portion of the predetermined overhead rate for the year= Total Budgeted Fixed Overhead cost for the year / Budgeted standard DLH
Fixed portion of the predetermined overhead rate for the year= $515900 / 67000 hours = $7.70 per DLH
Fixed overhead
Denominator level of activity
Fixed portion of the predetermined overhead rate
Answer:2
Fixed overhead budget variance = Budgeted fixed overhead cost - Actual fixed overhead cost for the year
Fixed overhead budget variance = $515900 - $509000 = $6900 F
Fixed overhead volume variance = Fixed portion of the predetermined overhead rate *(Standard hours allowed for actual output - Denominator hours)
Fixed overhead volume variance = $7.70 per DLH (65000 hrs. - 67000 hrs.)
= $7.70 per DLH * 2000 hrs. = $15400 U
Budget Variance
Actual fixed overhead cost for the year
Budgeted fixed overhead cost
Budget variance
Volume Variance
Fixed portion of the predetermined overhead rate
DLH
Denominator hours
DLHs
Standard hours allowed
DLHs
Volume variance
Fixed overhead
$515900Denominator level of activity
67000 hoursFixed portion of the predetermined overhead rate
$7.70 per DLHRelated Questions
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