Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 28

Fixed overhead variances-various issues Silverstone's production budget for July called for making 40,000 units of a single product. The firm's production standards allow one-half of a machine hour per unit produced. The fixed overhead budget for July was $36,000. Silverstone uses an absorption costing system. Actual activity and costs for July were:

Required:
a. Calculate the predetermined fixed overhead application rate per machine hour that would be used in July.
b. Calculate the number of machine hours that would be allowed for actual July production.
c. Calculate the fixed overhead applied to work in process during July.
d. Calculate the over- or underapplied fixed overhead for July.
e. Calculate the fixed overhead budget and volume variances for July.