[k1zuna]

Question:

Nanjones Company manufactures a line of products distributed nationally through wholesalers. Presented below are

planned manufacturing data for Year 1 and actual data for November Year 1. The company applies overhead based on

planned machine hours using a predetermined annual rate.

Year 1 Planned Data:

……………………………………………Annual……November

Fixed manufacturing overhead…..$1,200,000…$100,000

Variable manufacturing overhead $2,400,000…$220,000

Direct labor hours…………………. 48,000…………..4,000

Machine hours …………………….240,000………..22,000

Actual Data for November Year 1:

Direct labor hours (actual) 4,200

Direct labor hours (plan based on output) 4,000

Machine hours (actual) 21,600

Machine hours (plan based on output) 21,000

Fixed manufacturing overhead $101,000

Variable manufacturing overhead $214,000

The fixed overhead volume variance for November Year 1 was:

a. $1,200 favorable.

b. $5,000 favorable. (correct answer)

c. $1,200 unfavorable.

d. $5,000 unfavorable.

Here’s becker’s answer:

Choice “b” is correct. $5,000 favorable.

The fixed overhead rate is $5 per machine hour [$1,200,000 / 240,000 = $5].

The amount of FIXED manufacturing overhead planned for November is $100,000.

Therefore, the standard production for FIXED overhead is 20,000 machine hours [$100,000/$5 = 20,000.]

The favorable variance is calculated as follows:

Applied FIXED Overhead

Standard Fixed OH Rate x Actual Production) = $5.00 x 21,000 = $105,000

Budgeted Overhead Based on Standard Hours

Standard Fixed OH Rate x Standard Production) = $5.00 x 20,000 = $100,000

FAVORABLE Fixed Overhead Volume Variance = $5,000

_____________________________________________________________________

I thought in order to find the FOH volume variance, you should do:

22000x(100000/22000) = 100000

21000x(100000/22000) = 95454

then find the difference which is 4546???????????????????????????

FAR - Passed
AUD - Passed
BEC - Passed
REG - 8/22/2013

[k1zuna]

ok never mind I got it… admin please delete thanks!

FAR - Passed
AUD - Passed
BEC - Passed
REG - 8/22/2013

[Author]

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