Question

The following information was compiled by Frank Ironman Incorporated:

Expected volume of production 50,000 units
Actual volume of production 47,000 units
Budgeted fixed overhead costs (for 50,000 budgeted units) $200,000
Actual fixed overhead costs $220,000
Actual variable overhead costs $790,000
Budgeted variable overhead costs (for 50,000 budgeted units) $855,000
Assume the cost allocation base for overhead costs is units of production. What is the fixed overhead flexible budget variance
A) $6,000 FavorableB) $12,000 UnfavorableC) $20,000 FavorableD) $20,000 Unfavorable

Answer 1

The correct option is D,$20,000 unfavorable

Step-by-step explanation:

In the first place, it is noteworthy that fixed overhead flexible budget variance is the between the budgeted overhead cost and the actual fixed overhead incurred.

When actual fixed cost overhead is lower than budgeted,the resultant effect is a favorable variance,where the reverse is the case when the budgeted fixed overhead cost is higher as is the case here.

budgeted fixed overhead costs $200,000

Actual fixed overhead costs ($220,000)

fixed overhead flexible budget variance ($20,000) unfavorable