Homework Answers
a.
Fixed overhead price variance = Actual overhead - Budgeted fixed overhead
= $902,000 - $911,820
= $9,820 (F)
Fixed overhead production volume variance = Budgeted fixed overhead - Applied overhead
Applied overhead = Applied fixed overhead rate * Production
= $2.60 * 343,700
= $893,620
Fixed overhead production volume variance = $911,820 - $893,620
= $18,200 (U)
b.
Actual production is less than the budgeted production because production volume variance is unfavorable.
Therefore budgeted production is 7,000 units more than the actual production.
= ($18,200 / $2.60) units + 343,700 units
= 7,000 units + 343,700 units
= 350,700 units
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