Primara Corporation has a standard cost system in which it applies overhead to 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 Actual fixed overhead cost for the year Budgeted direct labor-hours (denominator level of activity) Actual direct labor-hours Standard direct labor-hours allowed for the actual output $ 545,100 $ 537,000 69,000 70,000 67,000 Required . Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.) 2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.) per DLH 1.Fixed portion of the predetermined overhead rate 2. Budget variance Volume variance

Explanation / Answer

1 Fixed portion of the predetrmined overhead rate = Total budgeted Fixed Cost/ Budgeted hours

= 545100 / 69000 = $7.9 per direct labour hour

2. Budget variance = Budgeted fixed cost - actual fixed cost

= 545100 - 537000 = 8100 Favorable

Volume variance = (Standard labour hours - budgeted labour hours)* Standard rate

= (67000 - 70000)*7.9 = 23700 Favorable

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