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  • 1.  FIXED OH VARIANCE-HELP REQUEST

    Posted 21 days ago
    A manufacturing company uses a standard cost system that applies overhead based upon direct labor hours. The manufacturing budget for the production of 7,500 units for the month is shown below:
    Direct labor (15,000 hours at $20 per hour)
    $300,000
    Variable overhead
    50,000
    Fixed overhead
    105,000
    During the month, 8,000 units were produced, and the fixed overhead budget variance was $1,000 unfavorable. Fixed overhead during the month was

    7000 usd over applied
    7000 us under applied
    6000 usd over applied
    6000 usd under applied


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    TIMUCIN ONER
    Director/Manager
    ANTALYA
    Turkey
    ------------------------------


  • 2.  RE: FIXED OH VARIANCE-HELP REQUEST

    Posted 20 days ago
    Hi,
     I think the answer will be $ 6000 over applied.


    See here the total Foh variance is given as $1000 (u)  and total Foh var = Foh spending var +Foh Prod. Volume var.

    Foh sp var = X - 105000
    As we need to find out actual Foh take it as X.

    Foh prod. Vol var = 105000 - 14*8000 =$7000

    Note:
    SR = 105000/7500 or 112000/8000 = $14

    So actual  Foh var will be
    X - 105000+7000 = 1000
    Or X = 99000

    Since actual Foh incurred ie, $99000 is less than the Applied Oh or Budgeted oh ie $105000

    The diff of $6000  is over applied.

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    VIMAL RAJ CHAKKINGAL
    Student
    PALAKKAD
    India
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  • 3.  RE: FIXED OH VARIANCE-HELP REQUEST

    Posted 19 days ago
    Thank you so much Vimal.

    ------------------------------
    TIMUCIN ONER
    Director/Manager
    ANTALYA
    Turkey
    ------------------------------



  • 4.  RE: FIXED OH VARIANCE-HELP REQUEST

    Posted 18 days ago
    I came up with same answer but the different working.
    FOH budget variance is same as FOH spending variance which is Actual-Budget=1000
    Actual - 105000 = 1000
    Actual = 106000
    applied = (8000*14)= 112000
    106000-112000=6000 Since the applied amount is more than actual the 6000 is Overapplied

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    Nurangez Gulayozova
    Controller
    Dubai
    United Arab Emirates
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  • 5.  RE: FIXED OH VARIANCE-HELP REQUEST

    Posted 14 days ago

    Correct Answer Explanation for D:

    In order to calculate the amount of overhead that was over- or under applied we need to compare the amount of overhead that was applied during the period with the actual amount of overhead incurred.

    Actual overhead during the period was $106,000. We calculate this by adding the $1,000 unfavorable fixed overhead budget variance to the budgeted amount of overhead, which was $105,000.

    Overhead is applied using direct labor hours. The budget called for $105,000 of fixed overhead costs and 15,000 direct labor hours. This gives a fixed overhead application rate of $7 per direct labor hour.

    During the period, the company produced 8,000 units. Therefore, the number of direct labor hours budgeted for the actual production was 8,000 × 2 direct labor hours per unit, or 16,000 direct labor hours. 

    Applying $7 per direct labor hour to the 16,000 direct labor hours allowed for the actual production equals the total fixed overhead applied of $112,000.

    $112,000 of fixed overhead applied is $6,000 greater than the $106,000 actual fixed overhead cost incurred for the period, so fixed overhead was overapplied by $6,000.



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    Nurangez Gulayozova
    Controller
    Dubai
    United Arab Emirates
    ------------------------------