Asked by Brycen Cluster on Jul 15, 2024
Verified
The total factory overhead cost variance is
A) $2,000 favorable
B) $5,000 unfavorable
C) $2,500 unfavorable
D) $5,000 favorable
Factory Overhead Cost Variance
The difference between the actual and budgeted indirect manufacturing costs.
Fixed Overhead
Costs that do not fluctuate with the level of production or sales, such as rent, salaries, and insurance.
Variable Overhead
These are costs that vary with production volume, such as materials and labor, as opposed to fixed overhead costs.
- Grasp the methods for calculating total factory overhead cost variances and understand their components.
Verified Answer
GS
Gursimran SinghJul 20, 2024
Final Answer :
B
Explanation :
To find the total factory overhead cost variance, we need to subtract the actual overhead costs from the standard overhead costs.
Standard fixed overhead: 3 hours/unit x 2,500 units x $0.80/hour = $6,000
Actual fixed overhead: $8,000
Variance in fixed overhead = $8,000 - $6,000 = $2,000 unfavorable
Standard variable overhead: 3 hours/unit x 2,500 units x $2.00/hour = $15,000
Actual variable overhead: $18,000
Variance in variable overhead = $18,000 - $15,000 = $3,000 unfavorable
Total factory overhead cost variance = (Variance in fixed overhead) + (Variance in variable overhead)
= ($2,000 unfavorable) + ($3,000 unfavorable)
= $5,000 unfavorable.
Therefore, the best answer is B.
Standard fixed overhead: 3 hours/unit x 2,500 units x $0.80/hour = $6,000
Actual fixed overhead: $8,000
Variance in fixed overhead = $8,000 - $6,000 = $2,000 unfavorable
Standard variable overhead: 3 hours/unit x 2,500 units x $2.00/hour = $15,000
Actual variable overhead: $18,000
Variance in variable overhead = $18,000 - $15,000 = $3,000 unfavorable
Total factory overhead cost variance = (Variance in fixed overhead) + (Variance in variable overhead)
= ($2,000 unfavorable) + ($3,000 unfavorable)
= $5,000 unfavorable.
Therefore, the best answer is B.
Learning Objectives
- Grasp the methods for calculating total factory overhead cost variances and understand their components.
Related questions
The Fixed Factory Overhead Volume Variance Is
The Following Information Was Taken from the Annual Manufacturing Overhead ...
The Overhead ______________ Variance Is the Difference Between Normal Capacity ...
Total Overhead Variance. (B) Prepare the Journal Entries to Record ...
Monte Industries Has a Standard Costing System ...