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Explanation to "Flexible Budget" question

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A furniture manufacturer has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

Denominator level of activity DLHs
Overhead costs at the denominator activity level:
Variable overhead cost
Fixed overhead cost

The following data pertain to operations for the most recent period:

Actual hours DLHs
Standard hours allowed for the actual output DLHs
Actual total variable overhead cost
Actual total fixed overhead cost

a. What is the predetermined overhead rate to the nearest cent?

b. How much overhead was applied to products during the period to the nearest dollar?

c. What was the fixed overhead budget variance for the period to the nearest dollar?

d. What was the fixed overhead volume variance for the period to the nearest dollar?

Solution Preview

Use any numbers
A furniture manufacturer has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

Denominator level of activity DLHs 20,000 hrs for 10,000 units produced
Overhead costs at the denominator activity level:
Variable overhead cost 100,000
Fixed overhead cost 350,000

The following data pertain to operations for the most ...

Solution Summary

This solution is comprised of a detailed explanation to answer what is the predetermined overhead rate to the nearest cent, how much overhead was applied to products during the period to the nearest dollar, what was the fixed overhead budget variance for the period to the nearest dollar, and what was the fixed overhead volume variance for the period to the nearest dollar.

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