Boxer Manufacturing produces premium dog houses. Each dog house requires 3.0 hou

Question

Boxer Manufacturing produces premium dog houses. Each dog house requires 3.0 hours of machine time for its elaborate trim and finishing. For the current year, Boxer calculated its predetermined fixed manufacturing overhead (MOH) rate to be $25 per machine hour. The company budgets its fixed MOH to be $105,000 per month. Last month, Boxer produced 1,300 dog houses and incurred $101,400 (actual) of fixed MOH Requirements 1. Calculate the fixed overhead budget variance. 2. Calculate the fixed overhead volume variance

Explanation / Answer

FOH budget variance Actual FOH Budgeted FOH Total variance F/U FOH budget variance = Actual FOH - Budgeted FOH FOH = Fixed overhead F= Favourable U = Unfavourable FOH budget variance Actual FOH Budgeted FOH Total variance F/U 101400 105000 3600 F FOH volume variance Budgeted FOH Applied FOH Total variance F/U FOH volume variance = Budgeted FOH - Applied FOH Applied FOH = Pre-determined overhead rate*Standard direct labor hours allowed for actual output Pre-determined overhead rate = $25 per machine hour Standard direct labor hours allowed for actual output = 1300*3 = 3900 Applied FOH = $25*3900 = 97500 FOH = Fixed overhead F= Favourable U = Unfavourable FOH volume variance Budgeted FOH Applied FOH Total variance F/U 105000 97500 7500 F

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