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25 January, 01:57

The standard cost and actual costs for factory overhead for the manufacture of 2500 units of actual production are as follows Fixed overhead (based on 10000 hours)

3 hours per unit @ $0.80 per hour

Variable overhead

3 hours per unit @ $2.00 per hour

Total variable cost $18000

Total fixed cost $8000

The amount of the fixed factory overhead volume variance is

A-$2000 favorable

B-$2000 unfavorable

C-$2500 unfavorable

D-$0

The amount of the variable factory overhead controllable variance is

A-$2000 unfavorable

B-$3000 favorable

C-$0

D-$3000 unfavorable

+2
Answers (1)
  1. 25 January, 02:09
    0
    1. The correct option is B

    2. The correct option is D

    Explanation:

    1

    The fixed factory overhead volume variance is computed as:

    Fixed factory overhead volume variance = Standard fixed overhead rate per hour * (Standard hours for actual output - Budgeted Output)

    where

    Standard fixed overhead rate per hour is $0.80

    Standard hours for actual output = 2,500 units * 3 hours per unit

    Budgeted output is 10,000 hours

    = $0.80 * [ (2,500 * 3) - 10,000]

    = $0.80 * (2,500)

    = ($2,000)

    It is unfavorable as it is negative.

    2

    The variable factory overhead controllable variance is computed as:

    Variable factory overhead controllable variance = Actual hours * (Standard rate per hour - Actual rate per hour)

    where

    Actual hours = 2,500 units * 3 hours per unit

    Standard rate per hour is $2.00 per hour

    Actual rate per hour = Total variable cost / Actual hours

    = (2,500 * 3) * [ 2 - ($18,000 / 7,500) ]

    = 7,500 * (2 - $2.4)

    = 7,500 * ($0.4)

    = ($3,000)

    It is unfavorable as it is negative.
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