Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:

Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:

Total budgeted fixed overhead cost for the year	$	426,400
Actual fixed overhead cost for the year	$	420,400
Budgeted direct labor-hours (denominator level of activity)		52,000
Actual direct labor-hours		53,000
Standard direct labor-hours allowed for the actual output		50,000

Required:

1. Compute the fixed portion of the predetermined overhead rate for the year. (Round Fixed portion of the predetermined overhead rate to 2 decimal places.)

2. Compute the fixed overhead budget variance and volume variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.) 

Explanation

1.

Fixed portion of the predetermined overhead rate	=	Fixed overhead
		Denominator level of activity
	=	$426,400	= $8.20 per DLH
		52,000 DLHs

2.

Budget variance	= Actual fixed overhead – Budgeted fixed overhead
	= $420,400 − $426,400
	= $6,000 F

Volume variance	= Fixed portion of the predetermined overhead rate × (Denominator hours – Standard hours allowed)
	= $8.20 per DLH × (52,000 DLHs − 50,000 DLHs)
	= $16,400 U

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