In addition to other costs, Borysko Telephone Company planned to incur $1,200,000 of fixed manufacturing overhead in making 500,000 telephones. Borysko actually produced 508,000 telephones, incurring actual overhead costs of $1,198,800. Borysko establishes its predetermined overhead rate based on the planned volume of production (expected number of telephones).
a. Calculate the predetermined overhead rate.
b. Determine the fixed cost spending variance and indicate whether it is favorable (F) or unfavorable (U).
c. Determine the fixed cost volume variance and indicate whether it is favorable (F) or unfavorable (U).