Exercise 8A-1 Fixed Overhead Variances [LO8-7]

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	$530,400
Actual fixed overhead cost for the year	$521,000
Budgeted standard direct labor-hours (denominator level of activity)	68,000
Actual direct labor-hours	69,000
Standard direct labor-hours allowed for the actual output	66,000

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.)

Fixed overhead	$ 530,400
Denominator level of activity	68,000	DLHs
Fixed portion of the predetermined overhead rate	$ 7.80	per DLH
sheet is drawn here

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.))

	Budget Variance
Actual fixed overhead cost for the year	$ 521,000
Budgeted fixed overhead cost	530,400
Budget variance		F
	Volume Variance
Fixed portion of the predetermined overhead rate	$ 7.80	DLH
Denominator hours	68,000	DLHs
Standard hours allowed	66,000	DLHs
Volume variance
	sheet is drawn here