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Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced.

Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine-hours per year, which represents 25,000 units of output. Annual budgeted fixed overhead costs are $250,000 and the budgeted variable 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 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 fixed overhead production volume variance for the year?
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I am sending you solution in other way also so you can understand it (denominator activity volume – SQ) x... View the full answer

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