Exercise- Using Fixed Overhead Variances
The standard cost card for the single product manufactured by Cutter, Inc., is given below:
Manufacturing overhead is applied to production on the basis of standard direct labor-hours. During the year, the company worked 9,920 hours and manufactured 10,800 units of product. Selected data relating to the company's fixed manufacturing overhead cost for the year are shown below:
| Standard Cost Card-per Unit |
| Direct materials, 4.3 yards at $4.00 per yard |
$ |
17.20 |
| Direct labor, .9 hours at $16.00 per hour |
|
14.40 |
| Variable overhead, .9 hours at $2.00 per hour |
|
1.80 |
| Fixed overhead, .9 hours at $4.50 per hour |
|
4.05 |
| |
| Total standard cost per unit |
$ |
37.45 |
Required:
1. What were the standard hours allowed for the year's production? (Round "Standard hours per unit" to 1 decimal place.)
2. What was the amount of budgeted fixed overhead cost for the year?
3. What was the fixed overhead budget variance for the year? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
4. What denominator activity level did the company use in setting the predetermined overhead rate for the year? (Round "Fixed cost element of the predetermined overhead rate" to 2 decimal places.)