Fletcher Company collected the following data regarding production of one of its products. Compute the fixed overhead cost variance. $\begin{array}{lrl}
\text { Direct labor standard (2 hrs. @ } \$ 12.75 / \mathrm{hr} .) & \$ 25.50& \text { per finished unit} \
\text { Actual direct labor hours } & 81,500& \text { hrs.} \
\text { Budgeted units } & 42,000& \text { units} \
\text { Actual finished units produced } & 40,000 & \text { units}\
\text { Standard variable OH rate }(2 \mathrm{hrs} . @ \$ 14.30 / \mathrm{hr} .) & \$ 28.60& \text { per finished unit} \
\text { Standard fixed OH rate }(\$ 336,000 / 42,000 \text { units) } & \$ 8.00 & \text { per unit}\
\text { Actual cost of variable overhead costs incurred } & \$ 1,140,000 \
\text { Actual cost of fixed overhead costs incurred } & \$ 338,000
\end{array}$

Question

Fletcher Company collected the following data regarding production of one of its products. Compute the fixed overhead cost variance. $\begin{array}{lrl}
\text { Direct labor standard (2 hrs. @ } \$ 12.75 / \mathrm{hr} .) & \$  25.50&  \text { per finished unit} \
\text { Actual direct labor hours } &  81,500&  \text {  hrs.} \
\text { Budgeted units } & 42,000&  \text { units} \
\text { Actual finished units produced } &  40,000 &  \text { units}\
\text { Standard variable OH rate }(2 \mathrm{hrs} . @ \$ 14.30 / \mathrm{hr} .) & \$  28.60& \text { per finished unit} \
\text { Standard fixed OH rate }(\$ 336,000 / 42,000 \text { units) } & \$  8.00 &  \text { per unit}\
\text { Actual cost of variable overhead costs incurred } & \$ 1,140,000 \
\text { Actual cost of fixed overhead costs incurred } & \$ 338,000
\end{array}$

Quizplus · Accepted Answer

The fixed overhead cost variance is calculated as the difference between the actual fixed overhead costs and the budgeted fixed overhead costs for the actual output. The budgeted fixed overhead for 40,000 units is 40,000 units * $8.00/unit = $320,000. The actual fixed overhead cost is $338,000. Therefore, the variance is $338,000 - $320,000 = $18,000 unfavorable.

Fletcher Company Collected the Following Data Regarding Production of One