# Question

Happy Valley Pet Products uses a standard costing system that applies overhead to products based on standard direct labour-hours allowed for actual output of the period. During the recent year, the following data were collected:
Total budgeted fixed overhead cost for the year . . . . . . . . . . . . . . . . . . . \$40,000
Actual fixed overhead cost for the year . . . . . . . . . . . . . . . . . . . . . . . . . . \$38,000
Budgeted standard direct labour-hours . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Actual direct labour-hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Standard direct labour-hours allowed for the actual output . . . . . . . . . . 9,000
Required:
1. Compute the fixed portion of the predetermined overhead rate for the year.
2. Compute the fixed overhead budget and volume variances.

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