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17 March, 15:58

1. Albertville has budgeted fixed overhead of $67,500 based on budgeted production of 4,500 units. During July, 4,700 units were produced and $71,400 was spent on fixed overhead. What is the fixed overhead spending variance? a. $3,900 unfavorableb. $900 unfavorablec. $900 favorabled. $3,000 favorable2. Albertville has budgeted fixed overhead of $67,500 based on budgeted production of 4,500 units. During July, 4,700 units were produced and $71,400 was spent on fixed overhead. What is the fixed overhead volume variance? a. $3,900 unfavorableb. $900 unfavorablec. $900 favorabled. $3,000 favorable2. Albertville has a direct labor standard of 2 hours per unit of output. Each employee has a standard wage rate of $22.50 per hour. During July, Albertville paid $189,500 to employees for 8,890 hours worked. 4,700 units were produced during July. What is the direct labor rate variance? a. $22,000 favorableb. $11,475 favorablec. $10,525 favorabled. $10,525 unfavorable

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  1. 17 March, 16:18
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    A. (a) 3,900 (unfavorable).

    B. (d) 3,000 (favorable).

    C. (c) 10,525 (favorable).

    Explanation:

    Requirement A

    We know,

    Fixed overhead spending variance = (Budgeted fixed overhead - Actual fixed overhead)

    Given,

    Budgeted fixed overhead = $67,500

    Actual fixed overhead = $71,400

    Putting the values into the formula, we can get

    Fixed overhead spending variance = (Budgeted fixed overhead - Actual fixed overhead)

    Or, Fixed overhead spending variance = ($67,500 - $71,400)

    Or, Fixed overhead spending variance = - 3,900

    Therefore, Fixed overhead spending variance = 3,900 (unfavorable).

    Since Budgeted fixed overhead is less than Actual fixed overhead, the situation is unfavorable.

    So option A is the answer.

    Requirement B

    We know,

    Fixed overhead volume variance = (Standard units - Budgeted units) * Standard fixed overhead rate.

    Given,

    Standard units = 4,700 units

    Budgeted units = 4,500 units

    Standard fixed overhead rate = $67,500 : 4,500

    Standard fixed overhead rate = $15

    Putting the values into the formula, we can get

    Fixed overhead volume variance = (4,700 - 4,500) * $15

    Or, Fixed overhead volume variance = 200 * $15

    Or, Fixed overhead volume variance = 3,000

    Therefore, Fixed overhead volume variance = 3,000 (favorable)

    Since budgeted fixed volume is higher than Actual fixed volume, the situation is favorable.

    So option D is the answer.

    Requirement C

    We know,

    Direct labor rate variance = (Standard rate - Actual rate) * Actual hour

    Given,

    Standard rate = $22.50

    Actual rate = $189,500 : 8,890 = 21.3161

    Actual hour = 8,890

    Putting the values into the formula, we can get

    Direct labor rate variance = ($22.50 - 21.3161) * 8,890

    Or, Direct labor rate variance = 1.1839 * 8,890

    Or, Direct labor rate variance = 10,525

    Therefore, Direct labor rate variance = 10,525 (favorable).

    Since direct labor rate is higher than Actual labor rate, the situation is favorable.

    So option C is the answer.
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