Question

Levelor Company's flexible budget shows $10,710 of overhead at 75% of capacity, which was the operating level achieved during May. However, the company applied overhead to production during May at a rate of $2.00 per direct labor hour based on a budgeted operating level of 6,120 direct labor hours (90% of capacity). If overhead actually incurred was $11,183 during May, the controllable variance for the month was:

Answer 1

The correct answer is $473 (Unfavorable).

Step-by-step explanation:

According to the scenario, the given data are as follows:

Actual overhead = $11,183

Budgeted Overhead = $10,710

So, we can calculate the controllable variance by using following formula:

Controllable variance = Actual overhead - Budgeted overhead

By putting the value, we get

Controllable variance = $11,183 - $10,710

= $473 ( Positive shows unfavorable)

= $473 (unfavorable)