The Diamond Manufacturing Company uses a standard cost system for and applies overhead based on machine hours. The following information is available for June: Standard: Machine hours (MH) per unit2Fixed overhead rate per MH$5.00Budgeted fixed overhead$25,000Actual: Machine hours4,800Fixed overhead$26,200Units produced2,600 Calculate the fixed overhead budget variance and volume variance for the month of June.

Step 1: Calculate the standard fixed overhead cost for actual productionStandard machine hours per…

Answered: The Diamond Manufacturing Company uses…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Diamond Manufacturing Company uses a standard cost system for and applies overhead based on machine hours. The following information is available for June:

Standard:
Machine hours (MH) per unit	2
Fixed overhead rate per MH	$5.00
Budgeted fixed overhead	$25,000
Actual:
Machine hours	4,800
Fixed overhead	$26,200
Units produced	2,600

Calculate the fixed overhead budget variance and volume variance for the month of June.

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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