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Approach Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 15,200 Actual fixed overhead incurred: $855,000 Standard fixed overhead rate: $13 per hour Budgeted fixed overhead: $820,000 Planned level of machine-hour activity: 62,000 If Approach estimates four hours to manufacture a completed unit, the company's fixed-overhead volume variance would be: Multiple Choice $15,600 negative
Approach Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended:
Actual units produced: 15,200
Actual fixed overhead incurred: $855,000
Standard fixed overhead rate: $13 per hour
Budgeted fixed overhead: $820,000
Planned level of machine-hour activity: 62,000
If Approach estimates four hours to manufacture a completed unit, the company's fixed-overhead volume variance would be:
Multiple Choice
- $15,600 negative.
- $15,600 positive.
- $35,000 negative.
- $35,000 positive.
- None of the answers is correct.
Expert Solution
Computation of Fixed-overhead Volume Variance:
Fixed Overhead Volume Variance = Standard Fixed Overhead for Actual Output - Budgeted Fixed Overhead
Here,
Standard Fixed Overhead for Actual Output= Actual Output * Estimated Number of Hour per Unit * Standard Fixed Overhead Rate
=15,200*4*13
=790,400
Budgeted Fixed Overhead = $820,000
Fixed overhead volume variance =$790,400-$820,000 = $29,600 Unfavorable
So, the correct option is 5th "None of the answers is correct".
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