Patton Corp

question 103

Essay

Patton Corp. uses a standard cost system to account for the costs of its one products. Budgeted fixed overhead is $75,000, budgeted production is 2,500 per month, and practical capacity is 3,000 units. During November, Patton produced 2,400 units. Fixed overhead incurred totaled $70,310.
Assume Patton calculates its fixed overhead rate based on budgeted production.
a. What is the fixed overhead rate?
b. What is the fixed overhead volume variance?
c. By how much was fixed overhead over- or underapplied?
Now assume Patton calculates its fixed overhead rate based on practical capacity.
d. What is the fixed overhead rate?
e. What is the expected (planned) capacity variance?
f. What is the unexpected (unplanned) capacity variance?
g. By how much was fixed overhead over- or under-applied?

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Definitions:

Sight Draft

A financial document demanding immediate payment upon presentation to the drawee, commonly used in international trade to control the transfer of goods.

Buyer's Bank

The financial institution that processes payments on behalf of a buyer, especially in international trade transactions.

Agreed-on Amount

A specific sum of money that has been mutually consented to by the parties involved in a transaction or contract.

International Purchasing Offices

Entities established by companies in foreign countries to facilitate the sourcing and procurement of goods and services.