Everjoice Company makes clocks. The fixed overhead costs for 20X5 total $720,000

Question

Everjoice Company makes clocks. The fixed overhead costs for 20X5 total $720,000. The company uses direct labor-hours for fixed overhead allocation and anticipates 240,000
hours during the year for 480,000 units. An equal number of units are budgeted for each
month.

During June, 42,000 clocks were produced and $63,000 were spent on fixed overhead.

Required:

Determine the fixed overhead rate for 20X5 based on units of input.

Determine the fixed overhead static-budget variance for June.

Determine the production-volume overhead variance for June.

Explanation / Answer

1.fixed overhead rate=$720000/240000=$3.00 per hour.

2.fixed overhead static budget variance=$63,000-($720,000/12)=$3000. unfavorable

3. budgeted fixed overhead static per unit =720,000/480,00=$1.50

4.denominator level in ouput units=($40,000-$42,000)*$1.50=$3000 favorable.

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