Chapter 11, Problem 11.12SE

Calculate and interpret overhead variances (Learning Objective 6)

Assume that the Janis Corporation’s manufacturing facility actually incurred $2,980,000 of manufacturing overhead for the year. Total fixed manufacturing overhead was budgeted at $3,010,000. Using a standard costing system, the company allocated $2,941,000 of fixed manufacturing overhead to production.

Requirements

1. 1. Calculate the total fixed manufacturing overhead variance. What does this tell managers?
2. 2. Determine the fixed overhead budget variance. What does this tell managers?
3. 3. Determine the fixed overhead volume variance. What does this tell managers?
4. 4. Doublecheck: Do the two variances (computed in Requirements 2 and 3) sum to the total overhead variance computed in Requirement 1?