Question

At the beginning of the year, X Company expected to produce 3,100 units of its only product. Its estimate of fixed overhead was $13,000, and its estimate of variable overhead per unit was $6.97. At the end of the year, 2,800 units were actually produced, with actual total overhead cost of $29,891. What was X Company's total overhead flexible budget varlance for the year [a positive number means a favorable variance; a negative number means an unfavorable variance]?

Answer 1

To calculate the total overhead flexible budget variance, we need to compare the actual overhead costs with the budgeted overhead costs.

The budgeted overhead costs can be calculated using the formula:

Budgeted Overhead Costs = Fixed Overhead + (Variable Overhead per Unit × Budgeted Units)

Given:

Fixed Overhead = $13,000

Variable Overhead per Unit = $6.97

Budgeted Units = 3,100 units

Budgeted Overhead Costs = $13,000 + ($6.97 × 3,100)

Budgeted Overhead Costs = $13,000 + $21,587

Budgeted Overhead Costs = $34,587

Now, we can calculate the total overhead flexible budget variance using the formula:

Total Overhead Flexible Budget Variance = Budgeted Overhead Costs - Actual Overhead Costs

Given:

Actual Overhead Costs = $29,891

Total Overhead Flexible Budget Variance = $34,587 - $29,891

Total Overhead Flexible Budget Variance = $4,696

Therefore, X Company's total overhead flexible budget variance for the year is $4,696 (a positive number, indicating a favorable variance).