Question

Bullseye Company manufactures dartboards. Its standard cost information follows:

	Standard Quantity		Standard Price (Rate)			Standard Unit Cost
Direct materials (cork board)	1.60	sq. ft.	$	0.90	per sq. ft.	$	1.44
Direct labor	0.90	hrs.	$	11.00	per hr.		9.90
Variable manufacturing overhead (based on direct labor hours)	0.90	hrs.	$	0.60	per hr.		0.54
Fixed manufacturing overhead ($13,200/88,000)							0.15

Bullseye has the following actual results for the month of September:

Number of units produced and sold		72,000
Number of square feet of corkboard used		119,200
Cost of corkboard used	$	119,600
Number of labor hours worked		76,000
Direct labor cost	$	112,000
Variable overhead cost	$	115,840
Fixed overhead cost	$	32,000

Required:
1. Calculate the fixed overhead spending variance for Bullseye. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Fixed overhead spending variance:

2. Calculate the fixed overhead volume variance for Bullseye. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Fixed overhead volume variance:

3. Calculate the total over- or underapplied fixed manufacturing overhead for Bullseye. (Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.)

Total fixed overhead variance:

Answer 1

SOLUTION

1. Fixed overhead spending variance = Actual fixed overhead - Budgeted fixed overhead

= $32,000 - $13,200

= $18,800 Unfavorable

2. Fixed overhead volume variance = Budgeted fixed overhead - Standard fixed oh applied on actual production

= $13,200 - (72,000 * 0.15)

= $13,200 - $10,800

= $2,400 Unfavorable

3. Total fixed overhead variance = Fixed overhead spending variance + Fixed overhead volume variance

= $18,800 Unfavorable + $2,400 Unfavorable

= $21,200 Unfavorable