# Question & Answer: stem in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the…..

 Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:
 Total budgeted fixed overhead cost for the year \$413,100 Actual fixed overhead cost for the year \$404,100 Budgeted standard direct labor-hours (denominator level of activity) 51,000 Actual direct labor-hours 52,000 Standard direct labor-hours allowed for the actual output 49,000
 Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.)

 2. Compute the fixed overhead budget variance and volume variance. (Round Fixed portion of the predetermined overhead rate to 2 decimal places. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.))

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Question & Answer: stem in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the…..
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SOLUTION:

1) Fixed portion of the predetermined overhead rate for the year

= Total Budgeted Fixed OH for the year/Budgeted standard labor hours

=413,100 / 51000 = \$8.1 per Std Lab Hr

2) Fixed-overhead budget variance = actual fixed OH – budgeted fixed OH

= \$404,100 – \$413,100 = 9000 U

Fixed-overhead volume variance = Budgeted fixed OH – Applied fixed OH =

Applied fixed OH = (\$413,000 ÷ 52,000) * 51,000 = \$405,058

Fixed-overhead volume variance = \$413,000 – \$405,058= 7,942