Reference: 11-11
The Clark Company makes a single product and uses standard costing. Variable overhead is assigned to production on the basis of direct labour hours. Some data concerning this product for the month of May follow: $$\begin{array} { | l | l | l | }
\hline \text { Labour rate variance: } & \$ 7,000 & \mathrm {~F} \
\hline \text { Labour efficiency variance: } & \$ 12,000 & \mathrm {~F} \
\hline \text { Variable overhead efficiency variance: } & \$ 4,000 & \mathrm {~F} \
\hline \text { Number of units produced: } & 10,000 & \
\hline \text { Standard labour rate per direct labour hour: } & \$ 12 & \
\hline \text { Standard variable overhead rate per direct labour hour: } & \$ 4 & \
\hline \text { Actual labour hours used: } & 14,000 & \
\hline \text { Actual variable manufacturing overhead costs: } & \$ 58,290 & \
\hline
\end{array}$$
-In a standard costing system, under-applied or over-applied fixed overhead is equal to the sum of the fixed overhead budget variance and the fixed overhead volume variance.

Question

Reference: 11-11
The Clark Company makes a single product and uses standard costing. Variable overhead is assigned to production on the basis of direct labour hours. Some data concerning this product for the month of May follow: $$\begin{array} { | l | l | l | } 
\hline \text { Labour rate variance: } & \$ 7,000 & \mathrm {~F} \
\hline \text { Labour efficiency variance: } & \$ 12,000 & \mathrm {~F} \
\hline \text { Variable overhead efficiency variance: } & \$ 4,000 & \mathrm {~F} \
\hline \text { Number of units produced: } & 10,000 & \
\hline \text { Standard labour rate per direct labour hour: } & \$ 12 & \
\hline \text { Standard variable overhead rate per direct labour hour: } & \$ 4 & \
\hline \text { Actual labour hours used: } & 14,000 & \
\hline \text { Actual variable manufacturing overhead costs: } & \$ 58,290 & \
\hline
\end{array}$$
-In a standard costing system, under-applied or over-applied fixed overhead is equal to the sum of the fixed overhead budget variance and the fixed overhead volume variance.

Quizplus · Accepted Answer

In a standard costing system, the total variance for fixed overhead indeed consists of the fixed overhead budget variance (which compares the actual fixed overhead costs to the budgeted fixed overhead costs) and the fixed overhead volume variance (which measures the difference between the budgeted fixed overhead allocated based on standard hours allowed for actual production and the actual fixed overhead incurred).

Reference: 11-11 the Clark Company Makes a Single Product and Uses

Reference: 11-11
the Clark Company Makes a Single Product and Uses