Fox Company manufactures decorative fountains used by hotels and restaurants. Th

Question

Fox Company manufactures decorative fountains used by hotels and restaurants. The company applies fixed overhead based on direct labor hours. Fox Company’s fixed overhead spending variance for the year was $6,500 unfavorable. For the current year, the company had budgeted to produce 78,000 fountains. The company’s actual fixed overhead for the year was $689,000. Fox produced 75,000 fountains and used 131,250 direct labor hours, which was the standard hours allowed for the number of fountains produced. What was Fox’s budgeted fixed overhead rate per direct labor hour for the year (if necessary, round your answer to the nearest cent)?

Explanation / Answer

FOH spending variance=actual fixed overhead- budgeted fixed overhead
6500=689000-x
Budgeted overhead=689000-6500=682500
Fixed overhead rate per DL= 682500/131250=5.20

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