Question

The production team for Take​ Eight, Inc., a manufacturer of pillow top​ mattresses, recently prepared a manufacturing cost budget for an output of​ 50,000 mattresses, as​ follows: Direct Materials ​$100,000 Direct Labor ​$50,000 Variable Overhead ​$75,000 Fixed Overhead ​$100,000 Actual costs incurred during the production of​ 60,000 mattresses​ were; direct​ materials, $110,000; direct​ labor, $60,000; variable​ overhead, $100,000; and fixed​ overhead, $97,000. If Take Eight evaluated performance by the use of a flexible​ budget, determine the dollar amount of the MOH flexible budget variance and if the variance is favorable or unfavorable.

A.​$23,000 favorable
B.$3,000 unfavorable
C.​$3,000 favorable
D.$7,000 unfavorable
E.$42,000 unfavorable

Answer 1

The correct answer is D.

Step-by-step explanation:

Giving the following information:

50,000 mattresses, as​ follows: Direct Materials ​$100,000 Direct Labor ​$50,000 Variable Overhead ​$75,000 Fixed Overhead ​$100,000 Actual costs incurred during the production of​ 60,000 mattresses​ were; direct​ materials, $110,000; direct​ labor, $60,000; variable​ overhead, $100,000; and fixed​ overhead, $97,000.

Variable Manufacturing overhead spending variance= (standard rate - actual rate)* actual quantity

Variable Manufacturing overhead spending variance= (1.5 - 1.6667)*60,000= $10,000 unfavorable

Fixed overhead variance= 100,000 - 97,000= 3,000 favorable

Total MOH variance= 7,000 unfavorable