Question

Cholla Company’s standard fixed overhead rate is based on budgeted fixed manufacturing overhead of $27,000 and budgeted production of 30,000 units. Actual results for the month of October reveal that Cholla produced 28,000 units and spent $25,500 on fixed manufacturing overhead costs.Calculate Cholla’s fixed overhead rate and the fixed overhead volume variance. (Round "Fixed Overhead Rate" to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)Fixed Overhead Rate per UnitFixed Overhead Volume Variance

Answer 1

Step-by-step explanation:

Fixed overhead rate = budgeted fixed manufacturing overhead

budgeted production

= 27000

30000

= $ 0.90 per unit

Absorbed Fixed overhead = Actual Output × Fixed overhead rate

= 28000 × 0.90

= 25200

Budgeted Fixed overhead = Budgeted Output × Fixed overhead rate

= 30000 × 0.90

= 27000

Fixed Overhead Volume Variance = Absorbed Fixed overhead - Budgeted Fixed overhead

= | 25200 - 27000 |

= $1800 ( unfavourable )