Question

The following information for the past year is available from Thinnews Co., a company that uses machine hours to apply standard factory overhead cost to outputs: Actual total factory overhead cost incurred Actual fixed overhead cost incurred Budgeted fixed overhead cost Actual machine hours Standard machine hours allowed for the units manufactured Denominator volume-machine hours Standard variable overhead rate per machine hour $24,000 $10,000 $11,000 5,000 4,800 5,500 $ 3.00 Under a two-variance breakdown (decomposition) of the total factory overhead variance, the total flexible-budget variance, to the nearest whole dollar, is:

Under a two-variance breakdown (decomposition) of the total factory overhead variance, the fixed overhead production volume variance, to the nearest whole dollar, is:

Multiple Choice

• $400 favorable.

• $600 unfavorable.

• $1,400 favorable.

• $1,400 unfavorable.

• $2,000 favorable.

b.

Under a two-variance breakdown (decomposition) of the total factory overhead variance, the total flexible-budget variance, to the nearest whole dollar, is:

Multiple Choice

• $400 favorable.

• $600 unfavorable.

• $1,400 favorable.

• $1,400 unfavorable.

• $2,000 favorable.

Answer 1

Ans:

a) $1400 Favorable

Fixed overhead production volume variance = Budgeted overhead-Flexible budget overhead

= 11000-(11000/5500*4800)

Fixed overhead production volume variance = 1400 Favorable

b)Total FB variance for overhead or total flexible-budget variance = $1,400 favorable

• Total flexible-budget variance = total actual overhead - FB for overhead based on output (i.e., based on allowed machine hours).
• Total actual overhead = $24,000 (given).
• FB for overhead based on output = Budgeted fixed overhead + budgeted variable overhead based on standard allowed machine hours = $11,000 + ($3/machine hour x 4,800 machine hours) = $25,400.
• Total FB variance for overhead =$24,000 - $25,400 = $1,400 favorable