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The following data is given for the Zoyza Company: Budgeted production (at 100% production capacity) 26,000 units Actual production 27,500 units Materials: Standard price per ounce $6
The following data is given for the Zoyza Company:
| Budgeted production (at 100% production 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 hours |
| Standard hours allowed per completed unit | 6.6 |
| Actual labor hours worked | 183,000 |
| Actual total labor costs | $4,520,000 |
| 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 |
| Overhead is applied on standard labor hours. |
What is the factory overhead volume variance?
Expert Solution
The calculated factory overhead volume variance is $59,400 (favorable)
Budgeted factory overhead volume :
Budgeted (& actual) fixed factory overhead = $1,029,600
Standard labor hours allowed per completed unit = 6.6 hours
Budgeted production (at 100% production capacity) = 26,000 units
Actual production = 27,500 units
Standard variable overhead rate = $24.50 per standard labor hour
Now, standard fixed overhead rate
= fixed factory overhead / (standard labor hour per unit x standard production units)
= $1,029,600/ (6.6 x 26,000)
= $6 per standard labor hour
Therefore, total standard labor hours
= standard labor hour per unit x actual nos. of units
= 6.6 x 27,500
= 181,500 labor hours
Now, total standard variable overhead expenses
= Standard variable overhead rate x total standard labor hours
= $24.50 x 181,500
= $4,446,750
Hence, total standard overhead expenses
= total standard variable overhead expenses + budgeted (& actual) fixed factory overhead expenses
= $4,446,750 + $1,029,600
= $5,476,350
Actual overhead charged to production :
= total standard labor hours ? standard total overhead rate
= 181,500 x (standard fixed overhead rate + standard variable overhead rate)
= 181,500 x ($6 + $24.50)
= $5,535,750
Now, Factory overhead volume variance is given by
= Budgeted factory overhead expenses - actual overhead charged to production
= $5,476,350 - $5,535,750
= -$59,400
= $59,400 (favorable)
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