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7 November, 06:18

Merone Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company bases its predetermined overhead rate on 2,800 machine-hours. The company's total budgeted fixed manufacturing overhead is $7,560. In the most recent month, the total actual fixed manufacturing overhead was $6,640. The company actually worked 2,700 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,820 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? (Round your intermediate calculations to 2 decimal places.)

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  1. 7 November, 06:26
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    Fixed Overhead Volume Variance $ 54 Favorable

    Explanation:

    Fixed Overhead Volume variance is the difference between the budgeted fixed overhead and applied fixed overhead.

    Budgeted Fixed Overhead = $7,560

    Applied Fixed Overhead = Standard Rate * Standard Hours

    Standard Rate for Fixed Overhead = $7,560/2,800 = $ 2.7

    Applied Fixed Overhead = $ 2.7*2,820 = $ 7614

    Fixed Overhead Volume Variance=Budgeted Fixed Overhead-Applied Fixed Overhead

    Fixed Overhead Volume Variance = $7,560-$ 7614 = $ 54 Favorable

    If applied overhead is more than budgeted overhead it is favorable because it indicates that the budgeted overhead is within in the standard range.
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