Zeno Company normally produces 15,000 units of product Z each month. Each unit r
ID: 2476256 • Letter: Z
Question
Zeno Company normally produces 15,000 units of product Z each month. Each unit requires 2 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at normal capacity at $8 and $4 per unit respectively. Cost and production information for July follow:
Production for the month.............................. 16,000 units
Direct labor hours used................................ 31,000 hours
Factory overhead incurred:
Variable costs ................................. 67,000
Fixed costs..................................... 115,000
Required: (show work)
1) Compute the flexible budget variance
2) Compute the production volume variance
Explanation / Answer
Details Static Budget Flexible budget Actual Results Per unit Total Amt Amt Units prodcued 15,000 16,000 16,000 Fixed Overhead cost 8 120,000 128,000 115,000 Variable overhead cost 4 60,000 64,000 67,000 Total 180,000 192,000 182,000 1 Flexible budget variance =Flexible budget -Actual results= $ 10,000.00 Favorable 2 Prodcution Volume variance= Static Budget-Flexible Budget= 12,000 Unfavorable
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