Merone Corporation applies manufacturing overhead to products on the basis of standard machine-hours.The company bases its predetermined overhead rate on 2,300 machine-hours.The company's total budgeted fixed manufacturing overhead is $5,060.In the most recent month, the total actual fixed manufacturing overhead was $4,660.The company actually worked 2,200 machine-hours during the month.The standard hours allowed for the actual output of the month totaled 2,320 machine-hours.What was the overall fixed manufacturing overhead volume variance for the month?

Question

Quizplus · Accepted Answer

Fixed Overhead Volume Variance = (Budgeted Fixed Overhead – Applied Fixed Overhead)
= ($5,060 – (2,300 machine-hours × predetermined overhead rate based on $5,060/2,300 machine-hours))
= ($5,060 – $4,660)
= $400 Favorable Fixed component of predetermined overhead rate = Estimated total fixed manufacturing overhead cost ÷ Estimated total amount of the allocation base = $5,060 ÷ 2,300 machine-hours = $2.20 per machine-hour
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $5,060 - (2,320 machine-hours × $2.20 per machine-hour)
= $5,060 - $5,104
= $44 F

Merone Corporation Applies Manufacturing Overhead to Products on the Basis