3. Variance Volume = the predetermined Fixed portion of overhead rate Denominator hours - hours Standard allowed
⎛ ⎞⎟
⎜ ⎟
⎜⎝ ⎠
= $6 per MH (45,000 MHs - 42,000 MHs)
= $18,000 U
Alternative solution to parts 1-3:
Actual Fixed
Overhead Cost Budgeted Fixed
Overhead Cost Fixed Overhead Cost Applied
to Work in Process
$267,000* $270,000 1 42,000 MHs 2 × $6 per MH 3
= $252,000
↑ ↑ ↑
Budget Variance,
$3,000 F* Volume Variance,
$18,000 U
1 $267,000 + $3,000 = $270,000.
2 14,000 units × 3 MHs per unit = 42,000 MHs
3 $270,000 ÷ 45,000 denominator MHs = $6 per MH
*Given.
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