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    Variance and overhead

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    Use the following information to answer questions 1 and 2

    Heart Ltd. applies overhead on the basis of machine hours. One and one�half (1.5) machine hours are required for each unit of product. The master budget showed planned production of 6,000 units for the upcoming period, with manufacturing overhead budgeted at $205,200 of which 25% is fixed. Actual results for the period were 6,150 units produced, with 10,100 machine hours used. Actual overhead costs were $158,500 variable and $57,000 fixed.

    1. Based on the information provided for Heart Ltd. what is the fixed overhead production volume variance for the period?
    a. $1,282 U
    b. $4,987 U
    c. $5,130 U
    d. $1,282 F
    e. $4,987 F

    2. Based on the information provided for Heart Ltd. what is the over or under applied overhead for the period?
    a. $ 182 Under applied
    b. $5,170 Under applied
    c. $10,300 Over applied
    d. $14,780 Over applied
    e. $25,080 Over applied

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    Solution Preview

    1. Production volume variance = Applied Fixed Overhead - Budgeted Fixed overhead
    Fixed overhead = 205,200 X 25% = ...

    Solution Summary

    The solution explains how to calculate the production volume variance and under or over applied overhead