Asked by Kaylee Rabon on May 27, 2024
Verified
Goolden Electronics Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs) .The company had budgeted its fixed manufacturing overhead cost at $58,000 for the month and its level of activity at 2,500 MHs.The actual total fixed manufacturing overhead was $61,200 for the month and the actual level of activity was 2,600 MHs.What was the fixed manufacturing overhead budget variance for the month to the nearest dollar?
A) $880 Unfavorable
B) $880 Favorable
C) $3,200 Favorable
D) $3,200 Unfavorable
Fixed Manufacturing Overhead
The portion of manufacturing overhead costs that remains constant regardless of the level of production, such as depreciation of equipment and salary of supervisors.
Budget Variance
The difference between budgeted and actual figures for a given period, indicating under or overspending.
Machine-Hours
A measure of production time, calculating the total hours a machine is operated in the production of goods.
- Analyze the variations in fixed and variable overhead costs, considering budget and volume discrepancies.
Verified Answer
= $61,200 - ($58,000/2,500 MHs x 2,600 MHs)
= $61,200 - $57,440
= $3,760
Since the actual fixed manufacturing overhead is higher than the budgeted amount, the variance is unfavorable. To the nearest dollar, the answer is $3,200 unfavorable (D).
= $61,200 - $58,000
= $3,200 U
Learning Objectives
- Analyze the variations in fixed and variable overhead costs, considering budget and volume discrepancies.
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