Exercises 15-27 Fixed Overhead Rate; Denominator Level; Two-Variance Breakdown of Total Factory Overhead Cost Variance [LO 15-1, 15-2]

Overhead information for Cran-Mar Company for October follows:

Total factory overhead cost incurred	$	31,800
Budgeted fixed factory overhead cost	$	7,335
Total standard overhead rate per machine hour (MH)	$	4.92
Standard variable factory overhead rate per MH	$	3.40
Standard MHs allowed for the units manufactured		4,400

Required:

1. What is the standard fixed factory overhead rate per machine hour (MH)?

2. What is the denominator activity level that was used to establish the fixed factory overhead application rate?

3. Two-way analysis (breakdown) of the total factory overhead cost variance: Using panel B in Exhibit 15.7 as a guide, calculate the following factory overhead cost variances for October and indicate whether each variance is favorable (F) or unfavorable (U).

a. Total flexible-budget variance.

b. Production volume variance.

c. Total overhead cost variance.

4. Confirm your answer to 3b above by using the model at the bottom of Exhibit 15.6 to calculate the production volume variance and indicate whether the variance is favorable (F) or unfavorable (U).