EXERCISE 11A-5 Using Fixed Overhead Variances (LO11-1 The standard cost card for

Question

EXERCISE 11A-5 Using Fixed Overhead Variances (LO11-1 The standard cost card for the single product manufactured by Cutter, Inc., is given below: Standard Cost Card-per Unit s 18 62 Direct materials, 3 yards at $6.00 per yard Direct labor, 4 hours at $15.50 per hour Variable overhead, 4 hours at $1.50 per hour Fixed overhead, 4 hours at $5.00 per hour Total standard cost per unit 20 $106 Manufacturing overhead is applied to production on the basis of standard direct labor-hours. Dur- ing the year. the company worked 37.000 hours and manufactured 9.500 units of product. Selected data relating to the company's fixed manufacturing overhead cost for the year are shown below Fixed Overhead Actual Fixed Overhead Budgeted Fixed Overhead Applied to Work in Process $198,700 ? hours×$_ per hour Budget variance, S? Volume variance, $10,000 U

Explanation / Answer

Standard hours for 9,500 units = 9,500 units x 4 hours per unit = 38,000 hours.

Fixed overhead applied to work in process = 38,000 hours x Fixed Overhead Rate = 38,000 hours x $ 5 per hour = $ 190,000.

Budget Variance = $ 190,000 + Volume Variance - Actual Fixed Overhead Cost = $ 190,000 + $ 10,000 - $ 198,700 = $ 1,300 F.

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