Lackawanna Licorice Company uses a standard cost accounting system and applies production overhead to products on the basis of machine hours. The following information is available for the year just ended:
Actual variable overhead: $166,320
Actual total overhead: $467,700
Actual machine hours worked: 23,100
Standard variable-overhead rate per hour: $7.50
Standard fixed-overhead rate per hour: $12.00
Planned activity during the period: 20,000 machine hours
Actual production: 10,700 finished units
Machine-hour standard: Two completed units per machine hour
1. Calculate the budgeted fixed overhead for the year.
2. Compute the variable-overhead spending variance.
3. Calculate the company’s fixed-overhead volume variance.
4. Did the company spend more or less than anticipated for fixed overhead? How much?
5. Was variable overhead underapplied or overapplied during the year? By how much?
6. On the basis of the data presented, does it appear that the company suffered a lengthy strike during the year by its production workers? Briefly explain.