Final Review
Multiple Choice & Problems Test
Multiple Choice & Problems Test
Click the “Check Your Answer” box below each question to reveal the correct answer and explanation.
1. The word “variance” refers to
a. the difference in estimated and actual costs
b. if a cost is budgeted or actual
c. period costs only
d. the difference in budgeted and estimated costs
Answer
See Variable Cost Variance Analysis
2. When preparing an analysis related to a short-term decision
a. fixed costs are never relevant
b. fixed costs are always relevant
c. variable production costs are always relevant
d. period costs are never relevant
Answer
3. Costs that become part of inventory are called
a. variable costs
b. product costs
c. period costs
d. period and product costs
Answer
B. By definition, costs that become part of inventory are product costs. Product costs are both fixed and variable. Period costs are expensed when incurred and do not become part of inventory. See Product and Period Costs
4. For process costing, the difference in equivalent units using FIFO and equivalent units using weighted average is
a. equivalent units in ending inventory
b. units started
c. equivalent units in beginning inventory
d. there is no difference, equivalent units are the same
Answer
5. Which of the following are included when computing the profitability of a segment?
a. sales less total company costs
b. sales less direct variable costs less total company fixed costs
c. sales less direct costs less allocated costs
d. sales less variable costs less direct fixed costs
Answer
6. The first thing that is done when preparing a comprehensive master budget is to project
a. units produced
b. units sold
c. sales dollars
d. each department’s expense budget
Answer
B. The budget process always begins with estimated sales in units which is then converted to sales dollars. Units produced is done based on the sales forecast. Department expense budgets are done after estimating the sales each department will need to support.
See Comprehensive Master Budgets.
7. Under applied manufacturing overhead means
a. actual overhead costs are higher than estimated overhead costs
b. actual overhead costs are lower than estimated overhead costs
c. actual overhead costs this period are higher than last years
d. budgeted overhead costs are higher than estimated overhead costs
Answer
A. Overhead is applied using an estimate. When under applied the estimate was lower than actual which is the same thing as actual higher than estimated. Over and under is relative only to the current period. Budgeted is the same as estimated. See Job Costing
8. Income for a variable costing income statement and income for an absorption costing income statement will be equal when
a. sales are different
b. the volume of production is different
c. raw materials inventory does not change for the current period
d. finished goods inventory does not change for the current period
Answer
D. The difference in the two statements is the fixed manufacturing overhead in the change in finished goods inventory on the balance sheet. When inventory does not change, there is no difference. The statements are for the same company so sales and production will always be the same. (a. & b.) Raw materials inventory impacts the balance sheet only. See Variable and Absorption Costing Income Statements
9. Contribution margin is an indication of
a. the amount from sales before variable costs
b. sales less fixed costs
c. fixed costs less variable cost
d. sales dollars available to cover fixed costs
Answer
D. By definition, contribution margin is the amount that is available to cover fixed costs. The CM income statement format is: Sales – VC = CM – FC = Profit. See Cost Volume Profit Analysis
10. Activity based costing provides valuable analysis for a company with
a. one product and one customer
b. one product, one very large customer and two very small customers
c. many services which require very little support
d. many products which require a high level of support
Answer
D. Activity based costing identifies the cost every time an activity occurs and then determines the cost of making and supporting a product or providing a service. No allocation is necessary if the company has one product or spends very little in support of the product or service provided. See Activity Based Costing
11. The most important factor to consider when deciding whether to accept a special order is
a. a sunk cost related to the special order
b. the normal selling price of the units in the special order
c. added contribution margin from the special order
d. avoidable fixed costs given the special order is accepted.
Answer
C. The company should consider the additional contribution margin the special order would generate. This amount must cover additional fixed costs. Sunk costs and avoidable fixed costs will not change and are never relevant. See Short-term Decisions
12. An internal rate of return higher than the required rate of return (discount rate) gives a net present value
a. equal to the cost of capital
b. equal to zero
c. higher than zero
d. less than zero
Answer
C. A net present value of zero means that the investment will give a return that is equal to the required rate or return. A positive (higher than zero) net present value means that the internal rate of return is higher than the discount rate. The return on investment is also called the internal rate of return. See Capital Investments.
13. A variable cost per unit is always
a. different for different levels of activity
b. constant for different levels of activity
c. a period cost
d. a product cost
Answer
B. By definition, a variable cost per unit remains constant. The total variable costs will change with changes in activity, but the cost per unit will not change (a. , c. & d.) Variable costs can be either product or period costs. See Cost Behavior, Variable and Fixed
14. The difference in a direct and an indirect cost can be described as
a. all period costs are indirect and all product are direct
b. direct costs can be easily traced to a product and indirect cannot
c. indirect costs are always a manufacturing overhead cost
d. indirect costs can be easily traced to a product and direct cannot
Answer
B. Direct costs can be easily and conveniently traced to the product and indirect costs can not. Most period costs are indirect, however, not all are direct. Manufacturing overhead, a product cost, is indirect. (a.) Most administrative costs are indirect.(c.) See Product and Period Costs
15. The major difference in activity based costing and traditional costing is
a. activity based costing defines product costs differently than GAAP
b. activity based costing only uses product costs in the analysis
c. only manufacturing costs are assigned to products in activity-based costing
d. more than one activity base is used with traditional costing
Answer
A. ABC defines a product cost as any cost associated with the product or service, not just the cost of making the product. The concept behind ABC is that the price must cover all costs, not just the cost of making the product. ABC allocates both product and period costs to the product or service. GAAP requires that only product costs be allocated to the product as the cost of inventory. See Activity Based Costing
16. When the level of activity decreases within a relevant range
a. fixed cost per unit will increase
b. fixed cost in total will increase
c. total variable costs in total will increase
d. variable cost per unit will decrease
Answer
A. Fixed cost per unit moves the opposite direction that the level of activity moves.When activity decreases, the cost per unit increases. Fixed costs in total do not change. (b.) Variable costs do not change per unit with changes in activity (d.) and the total variable costs will move the same direction as the activity (c.). See Cost Behavior, Variable and Fixed
17. What is included in the cost of goods manufactured?
a. only direct costs
b. direct product costs plus manufacturing overhead
c. product costs, beginning Work in Process and ending Work in Process
d. only indirect costs
Answer
B. Direct material and direct labor are direct product costs. Direct material, direct labor, and manufacturing overhead are included in cost of goods manufactured. All product costs are included in beginning Work in Process. Ending work in process is subtracted and not included in cost of goods manufactured. (c.) See Cost of Goods Manufactured
18. A company uses standard costs to
a. estimate the cost of manufacturing the products
b. eliminate the need to record actual costs
c. replace the master budgeting process
d. allow management to compare actual current year to prior year costs
Answer
A. A standard cost is an estimate. Management estimates at the beginning of the year so that they can compare actual costs to the original estimate and control costs. Actual costs must always be recorded and reported on the income statement as cost of goods sold and on the balance sheet as inventory. Normally, developing standard costs is a separate part of the budgeting process. See Variable Cost Variance Analysis
19. The percent return on investment (ROI) considers:
a. operating income after tax
b. interest expense
c. average operating assets
d. unpaid expenses
Answer
20. Which of the following costs are not reported as cost of goods sold on the income statement?
a. labor incurred to run the machine that makes the product
b. material that becomes part of the product
c. indirect labor
d. warehouse costs
Answer
D. Product costs become inventory which become cost of goods sold when the product is sold. Product costs are direct labor (a.), direct material (b.) and manufacturing overhead (c.). Indirect labor is part of manufacturing overhead (c.) Warehouse costs are operating costs that are expensed as incurred and not part of inventory. See Cost of Goods Manufactured
21. Actual overhead costs equaled estimated overhead costs. Actual direct labor hours were higher than budgeted direct labors. Overhead will be
a. under applied
b. over applied
c. equal to $0
d. cannot be determined from the information provided
Answer
22. Which of the following is not a price variance?
a. labor rate variance
b. overhead spending variance
c. overhead budget variance
d. overhead volume variance
Answer
D. The overhead volume variance comes from a difference in the actual quantity used to produce products and the quantity expected to be used. The standard price is held constant in the volume variance and the difference is not due to price. a., b., and c, are all variances that occur because the actual price is different than the standard price. See Fixed Overhead Variance Analysis and Variable Cost Variances
23. Which of the following is the common order one would prepare a comprehensive master budget?
a. sales, manufacturing overhead, production
b. sales, materials purchases, selling and administrative
c. income statement, materials purchases, direct labor
d. materials purchases, direct labor, sales
Answer
B. The comprehensive budget process always begins with the sales forecast. Production in units follows the sales forecast. The number of units produced determines the required materials. Period costs are projected after period costs. See Comprehensive Master Budgets
24. The accountant who prepares an absorption cost income statement must know
a. the difference between product and period costs
b. the difference between fixed and variable costs
c. how variable cost per unit change as sales volume changes
d. how costs behave in relation to volume changes
Answer
A. An absorption cost income statement is sorted by product (CGS) and period (operating) costs. For this statement, it does not matter if a cost is variable or fixed. Fixed and variable costs behave differently when volume changes (d.) See Variable and Absorption Costing Income Statements
25. If the selling price per unit decreases, units that must be sold to achieve break-even will
a. increase
b. decrease
c. remain the same
d. not enough information to be able to tell
Answer
A. The number of units required to break even will be higher because the contribution margin from each unit will be lower if the selling price is higher. See Cost Volume Profit Analysis
26. The company produced 50,000 units and the sales price is $24 each.
| Rent at the manufacturing plant | $ 89,000 |
| Utilities at the manufacturing plant | $ 34,000 |
| General business insurance | $ 12,000 |
| Direct materials | $288,000 |
| Plant manager’s salary | $ 56,000 |
| Direct labor | $156,000 |
| Glue used to put together products | $ 6,000 |
| Total advertising paid at a weekly rate | $ 28,000 |
| Sales commissions | $ 10,000 |
| Salesman travel that is planned each year | $ 39,000 |
| Executive and administrative salaries | $162,000 |
| Inventory information follows: | Beginning | Ending |
| Finished Goods | 84,000 | 96,000 |
| Raw Materials | 126,000 | 143,000 |
| Work in Process | 10,000 | 12,000 |
Determine:
a. Contribution margin per unit and contribution margin ratio
b. Break – even in units and sales dollars
c. Units and sales dollars sold to have before tax profit of $50,000
d. Operating leverage
e. The expected income if sales increase 10%
f. How many sales dollars are required to give a $0 profit if variable costs increase by 10%?
Answer
See Cost Volume Profit Analysis
Begin this problem by identifying variable and fixed costs:
Variable
| Utilities – manufacturing | 34,000 |
| Direct materials | 288,000 |
| Direct labor | 156,000 |
| Glue – | 6,000 |
| Sales commissions | 10,000 |
| Total | 494,000 |
Fixed
| Rent – manufacturing | 89,000 |
| General bus. insurance | 12,000 |
| Plant manager salary | 56,000 |
| Advertising | 28,000 |
| Salesman travel | 39,000 |
| Executive admin salary | 162,000 |
| Total | 386,000 |
Compute variable cost per unit –
Divide the total variable costs by sales
$494,000 / 38,000 = $13 per unit
Compute Units Sold:
| Beginning FG units | 84,000 |
| + Units Made | 50,000 |
| – Ending FG units | (96,000) |
| = Units sold | 38,000 |
A. Contribution margin per unit:
$24 sales – $13 variable cost = $11 per unit
A. Contribution margin ratio is
$11 CM / $24 sales = 0.458 or 45.8%
| B. $386,000 = 35,091 units to B/E $11 per unit |
| B. $386,000 = $842,795 to B/E 0.458 |
| C. $386,000 + $50,000 = 39,636 units $11 per unit |
| C. $386,000 + $50,000 = $951,965 0.458 |
D. Do an income statement using units sold to get total CM and Income
| Sales | $912,000 |
| – All VC | ($494,000) |
| = CM | $418,000 |
| – All FC | ($386,000) |
| = Income | $32,000 |
Per unit x 38,000 units
$418,000 = 13.06 x factor
$ 32,000
E. To get the % income is expected to increase is sales increase do the following:
| Sales % increase | 10% |
| x operating leverage factor | 13.06 |
| = % income will increase | 130.6% |
32,000 X 2.306 = $73,792 expected income
F. A zero profit is just another way of saying break even. Use the break-even formula with the new contribution margin after the 10% increase in variable costs.
| Sales | $912,000 |
| – New variable costs | ($543,400) |
| = New Contribution margin | $368,600 |
| New CM ratio | 0.404 |
New variable costs = $494,000 x 1.1 (up 10%)
New CM ratio = $368,600 / $912,000
| $386,000 = $955,446 to break even 0.404 if variable costs increase 10% |
A. Record all transactions for the company for the first month of operations.
B. Calculate Cost of Goods Manufactured for the first month of operations.
C. Calculate Cost of Goods Sold for the first month of operations.
D. Prepare an income statement for the first month of operations.
Answer
All transactions are the transactions all manufacturing companies do.
Purchase materials
Use materials, requisition (move) to the production line
Incur manufacturing overhead – include indirect costs – costs – actual incurred
Pay labor – direct and indirect
Apply overhead – use the predetermined manufacturing overhead rate
Get manufacturing overhead to 0 – make applied = to actual
Transfer completed goods to finished goods
Record cost of goods sold and sales
Record period expenses
Purchase materials Raw materials $226,000 Accounts Payable/Cash $226,000 Use materials, move materials to the production line Work in Process $99,000 Manufacturing O/H $ 6,400 Raw materials $105,400 Incur manufacturing overhead – include indirect costs Manufacturing overhead $ 11,000 Manufacturing overhead $266,000 Cash/Accounts Payable $266,000 Accumulated depreciation $ 11,000 Pay labor – direct and indirect Work in Process $149,000 Manufacturing overhead $ 72,000 Salaries Payable $221,000 Apply overhead Work in Process $357,996 Manufacturing Overhead $357,996
$5,000,000 / 15,000 = $333.33 per machine hour x 1,074 machine hours
Get manufacturing overhead to 0 – make applied = to actual
Actual $355,400
Applied $357,996
Over applied $2,596
Actual MOH = 6,400 + 11,000 + 266,000 +72,000
Over-applied means costs added to WIP were too high and must decrease
Manufacturing Overhead $2,596
Cost of Goods Sold $2,596
Transfer completed goods to finished goods
B. Calculate Cost of Goods Manufactured:
+ Direct material added to WIP 99,000 + Direct labor added to WIP 149,000 + manufacturing overhead – actual 355,400 + Beginning WIP 0 - Ending WIP (14,923) = CGM, Transferred to Finished Goods 588,477 Finished Goods $588,477 Work in Process $588,477
C. Record cost of goods sold and sales
Sales 727,000 - CGS ? 65% Gross Profit ? 35% Sales x 65% = Cost of goods sold $727,000 x 0.65 = $472,550 Cost of Goods Sold $472,550 Finished Goods $472,550 Accounts Receivable (cash) $727,000 Sales $727,000 Record Period Costs: Administrative Expense $135,000 Accounts Payable (Cash) $117,000 Accumulated Depreciation $ 18,000
D.
Sales $727,000 - Cost of Goods Sold (472,550) = Gross Profit 254,450 - Operating Expenses (135,000) = Income $119,450
28. A manufacturing company identified the following cost pools and total company cost drivers for the current period:
Cost Pool Cost Driver Machine set ups $145,000 500 set ups Material handling $220,000 2,000 purchase orders Inspection of products $102,300 12,400 inspections
Information on two jobs completed this month follows:
Job 1 Job 2 Direct materials $12,000 $16,300 Direct labor $ 9,450 $ 4,590 Units in the job 100 50 Set ups 3 8 Purchase orders 7 2 Inspections 21 16 Direct labor hours 96 41
A. Determine how much overhead should be assigned to Job 2 using activity-based costing.
B. Determine the cost per unit for Job 1 using activity-based costing.
Answer
First step: Calculate the cost per activity:
Total Cost Pool $ / Total Cost Driver = Cost per Activity
Set ups 145,000 / 500 = $290.00 Purchase Orders 220,000 / 2,000 = $110.00 Inspections 102,300 / 12,400 = $ 8.25
A. Overhead assigned to Job 2 is the quantity of activity in Job 2 x cost per activity
Set ups 8 x $290 = $2,320 Purchase Orders 2 x $110 = $ 220 Inspections 16 x $ 8.25 = $ 132 Total O/H $2,672
B. To calculate the cost per unit for Job 1 you must calculate the total overhead for
Job 1 and add it to the direct material and direct labor and then divide by units
Set ups 3 x $290 = $ 870 Purchase Orders 7 x $110 = $ 770 Inspections 21 x $ 8.25 = $ 173.25 Total O/H $ 1,813.25
Direct material $12,000 Direct labor $ 9,450 Overhead $ 1,813.25 Total $23,263.25 Divide by units 100 Cost per unit $ 232.63
29. The company produces fruit juice. The following operating statistics are available for the current month:
Beginning Inventory – 30% complete for materials and 60% complete for conversion 2,000 gallons Started during the month 152,000 gallons Ending Inventory – 40% complete for all costs 4,000 gallons
Cost information: Material Conversion Beginning $17,903 $33,406 Added this period $147,501 $298,128
A. Calculate FIFO equivalent units of production for materials and conversion:
B. Compute the value of Work in Process and finished goods.
C. Compute the weighted average equivalent units without completing a full schedule of equivalent units
Answer
A. Equivalent units schedule- FIFO
Quantity Went in during this period: Beginning Inventory 2,000 +Started in to Production 152,000 =Total Units to be accounted for: 154,000
Equivalent Units Quantity Material Conversion Beginning Inventory 2,000 1,400 800 +Started and Completed: 148,000 148,000 148,000 +Ending Inventory 4,000 1,600 1,600 =Total units accounted for 154,000 151,000 150,400
B. Value WIP and FG
1st—Compute cost per unit using FIFO: use only the $ added this period/ equiv. units
Material Conversion Beginning $147,501 $298,128 Equivalent Units 151,000 150,400 Cost per Eq. Unit $0.98 $1.98
2nd-- Value WIP: Material: 1,600 x $0.98 = $1,568 Conversion: 1,600 x $1.98 = $3,168 Total WIP Value $4,736
3rd—Value FG- This is done in 3 parts: Beginning Inventory $ (17,903 + 33,406) $51,309 Beginning Inventory finished this period Material 1,400 x $0.98 $1,372 Conversion 800 x $1.98 $1,584 Started/Completed this period Material 148,000 x $0.99 $146,520 Conversion 148,000 x $1.98 $293,040 (or together 148,000 x $2.97) Total Finished Goods $493,825
C. Reconciliation
Equivalent Units FIFO 151,000 150,400
Last Period Eq. Units 600 1,200
Equivalent Units W. A 151,600 151,600
30. A manufacturing company produced 150,000 units. The selling price per unit is $13.25. Beginning finished goods inventory was 37,000 units and ending finished goods inventory is 25,000 units. The following information is to be reported on the income statement:
Rent at the manufacturing plant $129,000 Utilities at the manufacturing plant $ 68,000 Materials used in the product $438,000 Plant manager’s and supervisors’ salaries $112,000 Labor assembling the product $156,000 Labor operating machines that make product $ 38,000 String used to put together products $ 8,000 Selling expense as a % of sales $270,000 Selling expense – doesn’t vary with sales $160,000 Executive and administrative salaries $175,000 Other fixed administrative expenses $ 65,000
A. Prepare an income statement using variable costing
B. Prepare an income statement using absorption costing
C. Reconcile the difference in income for the two statements.
Answer
First determine the units sold: Beginning Inventory 37,000 + Made 150,000 - Ending Inventory (25,000) Sold 162,000
Then determine variable and fixed costs, variable costs per unit, the fixed manufacturing overhead cost per unit, and total period costs
Variable Fixed Variable Per Unit Rent at the manufacturing plant $129,000 Utilities at the manufacturing plant $ 68,000 .45 Materials used in the product $438,000 2.92 Plant manager’s and supervisors’ salaries $112,000 Labor assembling the product $156,000 1.04 Labor operating machines that make product $ 38,000 .25 String used to put together products $ 8,000 .05 Selling expense as a % of sales $270,000 1.667 Selling expense – doesn’t vary with sales $160,000 Executive and administrative salaries $175,000 Other fixed administrative expenses $ 65,000 Total $641,000
Variable production costs:
Divide by units produced to get variable cost per unit
Total variable production costs =
$4.71 (.45 + 2.92 + 1.04 + .25 + .05)
Variable selling costs:
Divide by units sold to get the variable cost per unit of $1.667
Fixed O/H is rent at manufacturing plant + Plant manager’s and supervisors’ salaries
$241,000 = $1.61 FMOH per unit
150,000
You can not prepare the income statements without this information, so always do the calculations first. Then drop the numbers into the proper format.
A. Variable cost income statement
Sales ($13.25 x 162,000 units sold) $2,146,500 - Variable Product Costs ($4.71 x # sold) $ 763,020 - Variable Period ($1.667 x # sold) $ 270,000 = Total Contribution Margin $1,113,480 - All Fixed Expenses: Selling, G& A $ 400,000 Fixed Manufacturing O/H $ 241,000 = Total Operating Income $ 472,480
B. Absorption costing income statement:
Sales ($13.25 x 162,000 units sold) $2,146,500 - Cost of Goods Sold: Variable product cost per unit ($4.71 x # sold) $ 763,020 Fixed product cost per unit ($1.61 x # sold) $ 260,820 = Gross Profit $1,122,660 - All variable period expenses ($1.67 x # sold) $ 270,000 All fixed period expenses $ 400,000 = Income Before Taxes $ 452,660
C.
Units Made 150,000 - Units Sold (162,000) = Change in Inventory (12,000) x Fixed M O/H rate per unit x $1.61 = Difference in the statements $19,320
Absorption income should be lower when inventory is lower
Variable Costing Income $472,480 Absorption Costing Income $452,660 Absorption Costing Income lower $ 19,820
It does not equal exactly because of rounding on the cost per units.
31. A manufacturing company currently manufactures a part that becomes part of the direct materials in one of its products. The cost to make this part themselves is:
Per unit Direct materials $ 6.75 Direct labor $12.50 Utilities to run the machine for the part $ 1.50 Fixed manufacturing overhead -allocated $ 4.00 Benefits for direct labor who make the part $ 1.80 Supervisors salary – direct to the part $35,000 Depreciation on the machines that make part $22,000
A supplier has proposed to provide the part for $25 per unit. The space that is currently used to manufacture the part would be used for making another product. The volume of production for this produce will not change. The machines currently used to make the part can be sold for $30,000. Currently 10,000 parts are manufactured annually.
Answer
Make:
Direct Materials $ 6.75 Direct Labor $12.50 Utilities (Variable MOH) $ 1.50 Benefits (Variable MOH) $ 1.80 Total Variable per unit $22.55 x Units Made 10,000 Total Variable Costs $225,500
Buy:
Cost per unit $25.00 x Total units 10,000 =Total cost to purchase $250,000 - Sale of Machine ($ 30,000) -Supervisors Salary ($ 35,000) Net Cost to Buy $185,000
Allocated fixed costs are not relevant because the company will incur the costs regardless of the decision made.
Depreciation is not relevant because it is a sunk cost that will not be recovered.
The Company should buy the part because they will save $40,500.
The sale of the machine is a savings for the first year only. The savings will be $10,500 in years after the first year.
32. A manufacturing company manufactures a component part used by defense contractors. The cost sheet calls for 2 pounds of material at $8.40 per pound and .75 hours of direct labor at $17 per hour. For the year, expected production is 100,000 components with total budgeted fixed manufacturing overhead of $300,000 and total budgeted variable manufacturing overhead of $180,000. Overhead is applied based on pounds of material used. During the year, a total of 104,000 components were produced. The company purchased 226,000 pounds of material for $1,912,500 and put into production 211,250 pounds of material. The actual cost of direct labor used was $1,426,008, an average of $17.55 per hour. Actual variable overhead for the year was $163,095. Actual fixed overhead totaled $311,065.
Compute all manufacturing cost variances, label and state favorable or unfavorable
Answer
Material:
AQ x AP AQ x SP AQ x SP SQ x SP Purch Purch Used Used $1,912,500 226,000 x $8.40 211,250 x $8.40 104,000 x 2 x $8.40 = $1,898,400 = $1,774,500 = $1,747,200 Variance $14,100 U $27,300 U price quantity
Labor:
AQ x AP AQ x SP SQ x SP $1,426,008 81,254 x $17 104,000 x .75 x $17 = $1,381,318 = $1,326,000 Variance $44,690 U $55,318 U rate efficiency
$1,426,008 / $17.55 = 81,254 actual hours
Variable Overhead
AQ x AP AQ x SP SQ x SP $163,095 211,250 x $0.90 104,000 x 2 x $0.90 = $190,125 = $187,200 Variance $27,030 F $2,925 U spending efficiency
Predetermined standard variable manufacturing overhead rate is computed:
$180,000 / (100,000 x 2 pounds each) = $0.90 per pound
Fixed Overhead:
Actual Budget Applied
$311,065 $300,000 104,000 x 2 x $1.50
= $312,000
Variance $11,065 U $12,000 F
Budget Volume
Predetermined standard fixed manufacturing overhead rate:
$300,000 / 100,000 x 2 pounds each = $1.50 per pound