Exercise 11A-6 (continued)
Fixed overhead budget and volume variances:
Fixed Overhead Applied
to Work in Process
Budgeted Fixed
Overhead
Actual Fixed
Overhead
8,750 standard MHs
× $3.10 per MH
= $27,125
$24,800*
$25,100
Volume variance
= $2,325 F
Budget variance
= $300 U
Total Variance = $2,025 F
*8,000 denominator MHs × $3.10 per MH = $24,800.
Alternative approach to the budget variance:
Budget Actual Fixed Budgeted Fixed
= –
Variance Overhead Cost Overhead Cost
= $25,100 – $24,800
= $300 U
Alternative approach to the volume variance:
( )
Fixed Portion of
Volume Denominator Standard Hours
=the Predetermined –
Variance Hours Allowed
Overhead Rate
= $3.10 per MH (8,000 MHs – 8,750 MHs)
= $2,325 F
