Response to the following:
Fixed overhead variances
In addition to the information for Acme Company in Mini-Exercises 1 and 2, the standard fixed overhead application rate per unit consists of $2 per machine hour and each unit is allowed a standard of 1 hour of machine time.
Required: Calculate the fixed overhead budget variance and the fixed overhead volume variance.
Exercises 2
Flexible budget and performance reporting
In addition to the information for Acme Company in Mini-Exercise 1, actual unit component costs incurred during August include direct materials, $8.25; direct labor, $9.45; variable overhead, $6.82. Actual fixed overhead was $33,500.
Required: Prepare a performance report, including each cost component, using the following headings:
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Cost Component
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Original Budget
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Flexible Budget
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Actual Cost
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Budget Variance
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Exercise 1
Flexible budget
Acme Company's production budget for August is 17,500 units and includes the following component unit costs: direct materials, $8; direct labor, $10; variable overhead, $6. Budgeted fixed overhead is $32,000. Actual production in August was 18,000 units.
Required: Prepare a flexible budget that would be used to compare against actual production costs for August.