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The Battaglia Co. produces lounge chairs. At a budgeted amount of 10,000 lounge chairs the manufacturing...

The Battaglia Co. produces lounge chairs. At a budgeted amount of 10,000 lounge chairs the manufacturing overhead is $50,000 variable and $135,000 fixed. If Battaglia had actual variable manufacturing overhead of $60,500 and actual fixed manufacturing overhead of $125,000 for 11,000 lounge chairs produced, what would the spending (flexible budget) variance be for the total manufacturing overhead?

A. $4,500 favorable

B. $500 unfavorable

C. $4,500 unfavorable

D. $500 favorable

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Answer #1

Option - A

Actual OH incurred = 60500+125000

= $ 185500

budgted Variable OH rate per unit = budgeted Variable OH / budgeted units

= 50000 / 10000

= $ 5 per unit

budgeted Fixed OH

= $ 135000

budgeted oH based on Actual UNITS PRODUCED

= ( 11000 * Variable oh rate per unit ) + budgeted Fixed OH

= (11000 * 5 ) + 135000

= $ 190000

Spending Variance For total manufacturing OH

= Actual OH - budgeted oH based on Actual UNITS PRODUCED

= 185500 - 190000

= $ 4500 ( Favorable )

Favorable Since Actual OH is less than the Budgeted

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