The following data is given for the Zoyza Company: Overhead is applied on standa

Question

The following data is given for the Zoyza Company:

Overhead is applied on standard labor hours.

The fixed factory overhead volume variance is

a.$59,400 unfavorable

b.$73,250 favorable

c.$59,400 favorable

d.$73,250 unfavorable

Budgeted production (at 100% of normal capacity) 26,000 units Actual production 27,500 units Materials: Standard price per ounce $6.50 Standard ounces per completed unit 8 Actual ounces purchased and used in production 228,000 Actual price paid for materials $1,504,800 Labor: Standard hourly labor rate $22 per hour Standard hours allowed per completed unit 6.6 Actual labor hours worked 183,000 Actual total labor costs $4,020,000 Overhead: Actual and budgeted fixed overhead $1,029,600 Standard variable overhead rate $24.50 per standard labor hour Actual variable overhead costs $4,520,000

Explanation / Answer

Answer c. $59,400 (F) Fixed Overhead Volume Variance = Budgeted Fixed Overhead - Flexible Fixed Overhead Budgeted Fixed Overhead = $1,029,600 Budgeted Labor Hours = 26,000 Units X 6.60 Hours = 171,600 Hrs Fixed Overhead Rate = $1,029,600 / 171,600 hrs = $6 per DLH Std. Hrs for actual production = 27,500 Units x 6.60 hrs = 181,500 hrs Flexible Fixed Overhead = 181,500 DLH X $6 = $1,089,000 Fixed Overhead Volume Variance = $1,029,600 - $1,089,000 Fixed Overhead Volume Variance = $59,400 (F)

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