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12 January, 16:03

The predetermined overhead rate for Waterway Industries is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150000 was divided by normal capacity of 30000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $10064 variable and $6120 fixed, and 1700 units were produced. The direct labor standard is 2 hours per unit produced. The total overhead variance is

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  1. 12 January, 16:33
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    Total Fixed Overhead Variance 679.67$ favorable

    Explanation:

    Waterway Industries

    Actual fixed overhead $ 6120

    Budgeted fixed overhead $ (50000 / 15000) * 1700 = $5667

    Allocated fixed overhead $ 1700 * 2*2 = $6800

    Standard overhead allocation rate $5

    Standard direct labor hours per unit 2 DLHr

    Normal capacity DLH = 30000

    Normal Capacity Units = 30,000/2 = 15,000

    Actual output 1700 units

    Total Fixed Overhead Variance = Budget Variance + Volume Variance

    =$ 453.33 unfavorable - $ 1133 favorable = 679.67$ favorable

    Budget Variance = Actual Fixed Overhead - Budgeted Fixed Overhead = $ 6120 - $ 5667 = $ 453.33 unfavorable

    Volume Variance = Budgeted Fixed Overhead - Allocated Fixed Overhead

    Volume Variance = $ 5667 - 6800

    Volume Variance = $ 1133 favorable
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