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The following information is available for Baxter Manufacturing for April:

Actual machine hours 840
Standard machine hours allowed 900
Denominator activity (machine hours) 1,000
Actual fixed overhead costs $3,800
Budgeted fixed overhead costs $4,000
Predetermined overhead rate ($1 variable $4 fixed) $5

Is the fixed overhead price (spending) variance for April favorable or unfavorable?

Respuesta :

Production volume variance is Unfavorable and Fixed overhead spending (budget) variance is favorable.

Explanation:

The formula for fixed budget variance as follows  

The Fixed overhead budget Variance = Budgeted Fixed Overhead minus Actual Fixed overhead

= $4000 minus $3800 = $200 Favorable

Fixed overhead spending (budget) variance is favorable.

The formula for Production Volume Variance is as follows:

The Production Volume Variance = Applied Fixed Overhead minus Budgeted Fixed Overhead

= ($4 into 900) minus $4000 = $3600 minus 4000 = $400 Unfavorable

Therefore, Production volume variance is Unfavorable.

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