I should say there is no "Spending and flexible budget variance" which is a part of "Flexible budget variances".
Fixed overhead variances can be broken down into "Spending and flexible budget variance" and "Production-volume variance".
That's why we need not to consider variable overhead.
To derive the product volume variance, calculate the different amount between "budget fixed overhead" and "standard input allowed for actual output multiply budgeted application rate".
The question didn't give "budget fixed overhead", we may derive this amount from deducting the "Spending and flexible budget variance" from the actual fixed overhead.
Equation: Actual Fixed Overhead(AFOH) – Budgeted Fixed Overhead(BFOH) = Spending and flexible budget variance
The question mentions that "actual input and output prices were equal to standard", it means there is no "Spending and flexible budget variance", we can modify the above equation as below:
Equation: Actual Fixed Overhead(AFOH) – Budgeted Fixed Overhead(BFOH) = 0
So … I did consider the "Flexible budget variances" but I didn't consider the "Variable overhead variances", also the product volume variance is included in fixed overhead variance system not variable overhead variance system.
Hope this may help.
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Mengrong Lin
Accountant
New Taipei City
Taiwan
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Original Message:
Sent: 06-02-2020 12:22 AM
From: Chia-Wei Tsai
Subject: CMA Part1: Manufacturing Overhead Volume Variance
Thank you for the reply. Your answer is correct.
I got confused on the "manufacturing OH volume variance". Does that mean variable OH+fixed OH?
From your solution, why is that we don't need to consider VOH?
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Chia-Wei Tsai
Student
West Monroe LA
United States
Original Message:
Sent: 05-31-2020 10:47 PM
From: Mengrong Lin
Subject: CMA Part1: Manufacturing Overhead Volume Variance
Actual input prices per unit of product and actual input quantities per unit of product were equal to standard.
I guess it means there is no variance in flexible budget variance.
Hence, the budget fixed overhead $5,600,000 is equal to the actual fixed overhead $5,600,000.
We can derived the fixed overhead standard input allowed for a unit is $35. ($5,600,000 / 160,000)
The manufacturing overhead volume variance is unfavorable $700,000. ($35 * (140,000 - 160,000))
Not sure I am right or not ......
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Mengrong Lin
Accountant
New Taipei City
Taiwan
Original Message:
Sent: 05-31-2020 04:31 PM
From: Chia-Wei Tsai
Subject: CMA Part1: Manufacturing Overhead Volume Variance
Denham Company began operations on January 3, 20x1. Standard costs were established in early January assuming a normal production volume of 160,000 units. However, Denham produced only 140,000 units of product and sold 100,000 units at a selling price of $180 per unit during 20x1. Variable costs totaled $7,000,000 of which 60 percent were manufacturing and 40 percent were selling. Fixed costs totaled $11,200,000 of which 50 percent were manufacturing and 50 percent were selling. Denham had no raw materials or work-in-process inventories at December 31, 20x1. Actual input prices per unit of product and actual input quantities per unit of product were equal to standard.
Denham's manufacturing overhead volume variance in 20x1 using full absorption costing is:
(A) $800,000 unfavorable.
(B) $800,000 favorable.
(C) $700,000 unfavorable.
(D) $700,000 favorable.
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Chia-Wei Tsai
Student
West Monroe LA
United States
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