Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 88

Fixed overhead variances—various issues Silverstone’s production budget for March called for making 200,000 units of a single product. The firm’s production standards allow one-quarter of a machine hour per unit produced. The fixed overhead budget for March was $108,000. Silverstone uses an absorption costing system. Actual activity and costs for March were:

Units produced	195,000
Fixed overhead costs incurred	$111,000

Required:

a. Calculate the predetermined fixed overhead application rate that would be used in March.

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b. Calculate the number of machine hours that would be allowed for actual March production.

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c. Calculate the fixed overhead applied to work in process during March.

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d. Calculate the over- or underapplied fixed overhead for March.

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e. Calculate the fixed overhead budget and volume variances for March.