Final answer:
The average fixed cost curve is a hyperbola that decreases as output increases, illustrating the concept of 'spreading the overhead' where fixed costs per unit get lower as production volume rises. To fully analyze the total manufacturing overhead variance, actual versus budgeted costs, encompassing both fixed and variable overhead, need to be considered.
Step-by-step explanation:
To determine the total manufacturing overhead variance for the total product cost flexible budget variance, one needs to consider both the fixed costs and variable costs associated with production. In the context provided, the average fixed cost is calculated by dividing the total fixed costs by the quantity of output produced. If the fixed cost is given as $1,000, the average fixed cost curve would be a hyperbola that approaches closer to the x-axis but never touches it, as production increases. This illustrates the concept of spreading the overhead, which means that the fixed cost per unit decreases as more units are produced.
Understanding the Average Fixed Cost Curve
The average fixed cost curve represents how fixed costs per unit change with changes in output level. At zero production, the fixed costs are at their maximum on a per unit basis because you have not produced any units to spread the cost over. As production increases, the average fixed cost per unit declines because the total fixed costs are being spread over a larger number of units. This 'spreading the overhead' results in a declining average fixed cost as output rises.
For a more comprehensive analysis, the total manufacturing overhead variance would require information about the actual costs incurred versus the budgeted or standard costs set by the company, including details on both fixed and variable overheads.
The complete question is: Based on the following, what is the total manufacturing overhead variance for the total product cost flexible budget variance? is: