The Dodge Company makes and sells a single product and uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. The Dodge Company had the following budgeted and actual data for the year:

The budgeted direct labor-hours is used as the denominator activity for the month.
-The fixed manufacturing overhead volume variance as:
A)$7,500 F
B)$1,500 F
C)$3,750 U
D)$7,500 U

Question

The Dodge Company makes and sells a single product and uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. The Dodge Company had the following budgeted and actual data for the year:

The budgeted direct labor-hours is used as the denominator activity for the month.
-The fixed manufacturing overhead volume variance as:

The budgeted direct labor-hours is used as the denominator activity for the month.
-The fixed manufacturing overhead volume variance as:
A)$7,500 F 
B)$1,500 F 
C)$3,750 U 
D)$7,500 U

Quizplus · Accepted Answer

Fixed component of predetermined overhead rate = Estimated total fixed manufacturing overhead cost F1F1F1S1F1F1F10 Estimated total amount of the allocation base
= $75,000 F1F1F1S1F1F1F10 (30,000 units F1F1F1S1F1F1F10 5 hours per unit)= $0.50 per hour
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $75,000 - (165,000 hours F1F1F1S1F1F1F10 $0.50 per DLH)
= $75,000 - $82,500 = $7,500 F

The Dodge Company Makes and Sells a Single Product and Uses