Silverstone\'s production budget for July called for making 38,400 units of a si
ID: 2527554 • Letter: S
Question
Silverstone's production budget for July called for making 38,400 units of a single product. The firm's production standards allow one-half of a machine hour per unit produced. The fixed overhead budget for Jly was $33,792. Silverstone uses an absorption costing system. Actual activity and costs for July were Units produced Fixed overhead costs incurred 35,562 $ 37,300 Required a. Calculate the predetermined fixed overhead application rate per machine hour that would be used in July. Round your answer to 2 decimal places.) Predetermined overhead application rate per machine hour b. Calculate the number of machine hours that would be allowed for actual July production. Machine hours allowed c. Calculate the fixed overhead applied to work in process during July. (Do not round intermediate calculations.) pplied overhead d. Calculate the over- or underapplied fixed overhead for July. (Do not round intermediate calculations.) fixed overhead e. Calculate the fixed overhead budget and volume variances for July. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable "U" for unfavorable, and "None" for no effect (i.e., zero variance). Fixed overhead budget variance Fixed overhead volume vanancesExplanation / Answer
Answer
A.
Predetermined overhead rate = Estimated manufacturing overhead cost/Estimated total units in the allocation base
Predetermined overhead rate = $33792/$38400
=0.88 per machine hour
B.
Machine hours allowed =35562 unit /1.5 hours per unit
=23708 hours
C.
Applied Overhead Rate = Budgeted overhead / Budgeted activity hours
Applied Overhead Rate = $33792 / 25600 hours
Applied Overhead Rate =1.32 per machine hour
Budgeted activity hours =38400/1.5
=25600 hours
D.
Estimated overhead rate = $33792/38400 units =0.88 per unit
total manufacturing overhead applied = estimated overhead rate*actual units produced
=0.88*35562
=$31295
Under applied =$37300-$31295
=$6005
E.
Fixed Overhead Volume Variance = Actual Fixed Overhead - Budgeted Fixed Overhead
Fixed Overhead Volume Variance =$37300 - $33792
=3508 Unfavorable
Fixed Overhead Volume Variance = (Actual Fixed Overhead – Budgeted Fixed Overhead)*Fixed Overhead Application Rate
Fixed Overhead Volume Variance =(35562-38400)*0.88
=2497 Unfavorable
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