Faessler Corporation Applies Overhead to Products Based on Machine-Hours

question 69

Essay

Faessler Corporation applies overhead to products based on machine-hours. The denominator level of activity is 6,500 machine-hours. The budgeted fixed manufacturing overhead costs are $242,450. In July, the actual fixed manufacturing overhead costs were $242,490 and the standard machine-hours allowed for the actual output were 7,000 machine-hours.
Required:
a. Compute the budget variance for July. Show your work!
b. Compute the volume variance for July. Show your work!

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, often referred to as shareholders' equity or owners' equity.

Bond Issuance Costs

Costs related to issuing bonds and debt securities, such as underwriting fees, legal fees, and registration fees, which are amortized over the life of the bond.

Underwriters

Financial specialists who assess and undertake the risk of another party for a fee, often in the context of issuing insurance policies or investment securities.

Discount

A reduction in the price of goods or services usually to encourage sales or to reward specific groups of customers.