Acme Company\'s production budget for August is 17,500 units and includes the fo

Question

Acme Company's production budget for August is 17,500 units and includes the following component unit costs: direct materials, $8; direct labor, $10; variable overhead, $8. Budgeted fixed overhead is $32,000. Actual production in August was 18,000 units, actual unit component costs incurred during August include direct materials, $8.25; direct labor, $9.45; variable overhead, $6.82. Actual fixed overhead was $33,500, the standard fixed overhead application rate per unit consists of $2 per machine hour and each unit is allowed a standard of 1 hour of machine time. Required: Calculate the fixed overhead budget variance and the fixed overhead volume variance.

Explanation / Answer

Fixed Overhead Volume Variance= Absorbed FO - Budgeted FO Fixed Overhead Volume Variance= Actual Output*FOAR - Budgetd Unit *FOAR FOAR = 32,000/17500 = 1.83 Fixed Overhead Volume Variance= 18000*1.83 - 32000 Fixed Overhead Volume Variance= 32914.29 - 32000 Fixed Overhead Volume Variance= 914.29   F Fixed Overhead Budget Variance = Actual Fixed Overhead - Budgeted Fixed Overhead Fixed Overhead Budget Variance = 33,500 - 32,000 Fixed Overhead Budget Variance = 1,500 U

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