Chapter 10A - Predetermined overhead rates and overhead analysis in a standard costing system. After studying chapter Appendix 10A, you should be able to compute and interpret the fixed overhead budget and volume variances. | Appendix 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System Learning Objective 4 (Appendix 10A) Compute and interpret the fixed overhead budget and volume variances. Budget variance Fixed Overhead Budget Variance Budget variance Budgeted fixed overhead Actual fixed overhead = – Actual Fixed Overhead Fixed Overhead Applied Budgeted Fixed Overhead Volume variance Fixed Overhead Volume Variance Volume variance Fixed overhead applied to work in process Budgeted fixed overhead = – Actual Fixed Overhead Fixed Overhead Applied Budgeted Fixed Overhead FPOHR = Fixed portion of the predetermined overhead rate DH = Denominator hours SH = Standard hours allowed for actual output SH × FPOHR DH × FPOHR Fixed Overhead Volume Variance Volume variance FPOHR × (DH – SH) = Actual Fixed Overhead Fixed Overhead Applied Budgeted Fixed Overhead Volume variance Computing Fixed Overhead Variances Computing Fixed Overhead Variances Predetermined Overhead Rates Predetermined . | Appendix 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System Learning Objective 4 (Appendix 10A) Compute and interpret the fixed overhead budget and volume variances. Budget variance Fixed Overhead Budget Variance Budget variance Budgeted fixed overhead Actual fixed overhead = – Actual Fixed Overhead Fixed Overhead Applied Budgeted Fixed Overhead Volume variance Fixed Overhead Volume Variance Volume variance Fixed overhead applied to work in process Budgeted fixed overhead = – Actual Fixed Overhead Fixed Overhead Applied Budgeted Fixed Overhead FPOHR = Fixed portion of the predetermined overhead rate DH = Denominator hours SH = Standard hours allowed for actual output SH × FPOHR DH × FPOHR Fixed Overhead Volume Variance Volume variance FPOHR × (DH – SH) = Actual Fixed Overhead Fixed Overhead Applied Budgeted Fixed Overhead Volume variance Computing Fixed Overhead Variances Computing Fixed Overhead Variances Predetermined Overhead Rates Predetermined overhead rate Estimated total manufacturing overhead cost Estimated total amount of the allocation base = Predetermined overhead rate $360,000 90,000 Machine-hours = Predetermined overhead rate = $ per machine-hour Predetermined Overhead Rates Fixed component of the predetermined overhead rate $270,000 90,000 Machine-hours = Fixed component of the predetermined overhead rate = $ per machine-hour Applying Manufacturing Overhead Overhead applied Predetermined overhead rate Standard hours allowed for the actual output = × Overhead applied $ per machine-hour 84,000 machine-hours = × Overhead applied $336,000 = Computing the Budget Variance Budget variance Budgeted fixed overhead Actual fixed overhead = – Budget variance = $280,000 – $270,000 Budget variance = $10,000 Unfavorable Computing the Volume Variance Volume variance Fixed overhead applied to work in process Budgeted fixed overhead = – Volume variance = $18,000 Unfavorable Volume variance = $270,000 – $ per .
