Fletcher Company collected the following data regarding production of one of its

ID: 2467150 • Letter: F

Question

Fletcher Company collected the following data regarding production of one of its products. Compute the fixed overhead cost variance.

Direct labor standard (2 hrs. @ $12.75/hr.) $25.50 per finished unit

Actual direct labor hours 81,500 hrs. Budgeted units 42,000 units

Actual finished units produced 40,000 units Standard variable OH rate (2 hrs. @ $14.30/hr.) $28.60 per finished unit

Standard fixed OH rate ($336,000/42,000 units) $8.00 per unit

Actual cost of variable overhead costs incurred $1,140,000

Actual cost of fixed overhead costs incurred $338,000

Fixed overhead cost variance.

1.Fixed overhead spending variance= Budgeted fixed overhead cost- Actual fixed overhead incurred

=$336,000-$338,000

=(2,000) (U)

2.Fixed overhead volume variance

=(Budgeted fixed overhead/budgeted production * units produced) -Budgeted fixed overhead

=($336,000/42000units*40000 units) -$336,000

=$320,000-$336,000

=$16,000(U)

Total fixed overhead cost variance =Fixed overhead spending variance+Fixed overhead volume variance

=($2,000) (U)+($16,000)(U)

=($18,000)(U)

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