JXB Machining uses a standard costing system and applies its fixed manufacturing

Question

JXB Machining uses a standard costing system and applies its fixed manufacturing overhead (FMOH) costs to products using a fixed pre-determined overhead rate (FPOHR) based on direct labor hours (DLHs) and a standard of 3 DLHs per unit. Reported results for the period were as follows FPOHR 2.50 $ per DLH Actual DLHs 15,000 Actual FMOH 33,000 $ Resulting Variances: FMOH Budget Variance 3,000$ Unfavorable FMOH Volume Variance 6,000$ Favorable Actual production in units for the period was closest to:

Explanation / Answer

FMOH Budget Variance = Budgeted FMOH - Actual FMOH

-$3,000 = Budgeted FMOH - $33,000

Budgeted FMOH = $33,000 - $3,000 = $30,000

FMOH Volume Variance = Applied FMOH - Budgeted FMOH

$6,000 = Applied FMOH - $30,000

Applied FMOH = $6,000+$30,000 = $36,000

Applied FMOH = Actual production*Standard DLHs*Predetermined Overhead rate

$36,000 = Actual production*3 DLHs*$2.50 per DLH

Actual Production = $36,000/(3*2.50)

= $36,000/7.50 = 4,800 units

Actual production in units for the period was closest to 4,800 units

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