Managerial Accounting Tough Question Need Help Today -> Variance

Question

Germosen, Inc. uses a standard cost system with direct labor hours (DLH's) as the application base for manufacturing overhead. Results for the year are below:
Prior to start of the year:
Standard DLH's per unit : 0.20
Planned Production : 800,000 units
Budgeted DLH's (denominator hours) : 160,000
Predetermined Fixed Manufacturing Overhead Rate : $12.48

At the end of the year :
Actual Production : 795,000 units
Actual DLH's : 158,000
Actual Fixed Manfacturing overhead Cost : $936,000

Question : What was Germosen's fixed manufacturing overhead volume variance for the year?
A) $24,960 Favorable B) $24,960 Unfavorable C) $12,480 Favorable D) $12,480 Unfavorable E) None of the Above

Answer was D) but I need help with steps as to how

Answer 1

The correct answer is D, $12,480 unfavorable.

 

The Standard DLH per unit is 0.20 when multiplied by 800,000 budgeted units it yielded 160,000 Budgeted DL hours.

Multiply the same Standard DLH rate 0.20 by actual units produced 795,000 unit, the result = 159.000 Actual DL hours.

The difference between 160,000 and 159,000 is 1,000 unfavorable DLH X 12.48 Fixed MFG overhead rate the result = $12,480 Unfavorable variance