At 16,000 units, variable manufacturing overhead is = $128,000
Hence, variable manufacturing overhead per unit = variable manufacturing overhead cost/Number of units
= 128,000/16,000
= $8
Variable manufacturing overhead at 18,000 units = 18,000 x 8
= $144,000
Fixed manufacturing overhead = $360,000
Budgeted overhead cost at 18,000 units = Budgeted Variable manufacturing overhead + Budgeted Fixed manufacturing overhead
= 144,000 + 360,000
= $504,000
Actual overhead cost = $500,000
Difference between actual and budgeted costs = Budgeted cost - Actual cost
= 504,000 - 500,000
= $4,000 Favorable
Correct option is (D)
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