Question

The following information relating to a company's overhead costs is available. Budgeted fixed overhead rate per...

The following information relating to a company's overhead costs is available.

Budgeted fixed overhead rate per machine hour $ 0.50
Actual variable overhead $ 73,000
Budgeted variable overhead rate per machine hour $ 2.50
Actual fixed overhead $ 17,000
Budgeted hours allowed for actual output achieved 32,000


Based on this information, the total overhead variance is:

Multiple Choice

  • $6,000 favorable.

  • $1,000 favorable.

  • $7,000 favorable.

  • $6,000 unfavorable.

  • $1,000 unfavorable.

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Homework Answers

Answer #1

Ans:

Option $6,000 favourable. Is Correct Answer

Explanation:

Total Overhead Variance=Total variable overhead Variace + Total Fixed overhead variance

= 7000 favourable +1000 unfavorable=$6000 favorable

The Total Variable Overhead Variance=Budgeted variable overhead-Actual total variable overhead

=Budgeted machine hours allowed for actual output*Budgeted variable overhead rate per machine hour - Actual total variable overhead

=32,000*$2.50-$73,000=$7,000 favourable.

The Total Fixed Overhead Variance=Budgeted Fixed overhead-Actual Fixed overhead

=Budgeted machine hours allowed for actual output*Budgeted Fixed overhead rate per machine hour - Actual Fixed overhead

=32000*.50-17000=16000-17000=1000 unfavorable.,,

Please comment in case of Issue.,,,

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