Question: Fixed Overhead and Practical Capacity The expected activity of the paper-making plant of Conroy Paper Company was 58,400 machine hours per month. Practical capacity was 73,000 machine hours per month. The standard machine hours allowed for the actual output achieved in January were 61,000. The budgeted fixed-factory-overhead items were as follows:
Because of unanticipated scheduling difficulties and the need for more indirect labor, the actual fixed factory overhead was $757,000.
1. Using practical capacity as the base for applying fixed factory overhead, prepare a summary analysis of fixed-overhead variances for January.
2. Using expected activity as the base for applying fixed factory overhead, prepare a summary analysis of fixed-overhead variances for January.
3. Explain why some of your variances in numbers 1 and 2 are the same and why some differ.