Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced.Practical capacity for the plant is defined as 50,000 machine hours per year, which represents25,000 units of output. Annual budgeted fixed factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory overhead costs are applied on thebasis of standard machine hours allowed for units produced. Budgeted and actual output for theyear was 20,000 units, which took 41,000 machine hours. Actual fixed factory overhead costs forthe year amounted to $245,000, while the actual variable overhead cost per unit was $3.90. Whatwas: (a) the fixed overhead spending (budget) variance for the year, and (b) the production volume variance for the year? Round each answer to the nearest whole dollar, and indicate whethereach variance was favorable (F) or unfavorable (U).
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Patel and Sons Inc. uses a
Practical capacity for the plant is defined as 50,000 machine hours per year, which represents
25,000 units of output. Annual budgeted fixed factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory overhead costs are applied on the
basis of standard machine hours allowed for units produced. Budgeted and actual output for the
year was 20,000 units, which took 41,000 machine hours. Actual fixed factory overhead costs for
the year amounted to $245,000, while the actual variable overhead cost per unit was $3.90. What
was: (a) the fixed overhead spending (budget) variance for the year, and (b) the production volume variance for the year? Round each answer to the nearest whole dollar, and indicate whether
each variance was favorable (F) or unfavorable (U).
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