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.