Question

A company's flexible budget for 51,000 units of production showed variable overhead costs of $84,150 and fixed overhead costs of $67,000. The company incurred overhead costs of $136,720 while operating at a volume of 43,000 units. The total controllable cost variance is:_________

Answer 1

$1,230 favorable

Step-by-step explanation:

Variable overheard cost per unit:

`(\$ 84,150)/(51,000) = \$1.65`

Fixed overhead costs: $67,000

Overhead costs for 43,000 units: $136,720

Projected overhead cost for 43,000 units (C):

`C= \$43,000*1.65 + \$67,000\\C=\$137,950`

Total controllable cost variance (V) :

`V= $137,950 - $136,720 \\V = $1,230`

Since the company spent less than projected the total controllable cost variance is $1,230 favorable