Question

Autogas Corporation manufactures​ industrial-sized gas furnaces and uses budgeted machine hours to allocate variable manufacturing overhead. The following information relates to the​ company's manufacturing overhead​ data: Budgeted output units 49 comma 10049,100 units Budgeted​ machine-hours 17 comma 18517,185 hours Budgeted variable manufacturing overhead costs for 49 comma 10049,100 units $ 360 comma 885$360,885 Actual output units produced 51 comma 10051,100 units Actual​ machine-hours used 14 comma 60014,600 hours Actual variable manufacturing overhead costs $ 385 comma 680$385,680 What is the​ flexible-budget variance for variable manufacturing​ overhead?

Answer 1

$10,095 Unfavorable

Explanation:

For computation of flexible-budget variance for variable manufacturing overhead first we need to find out the budgeted machine hours for 51,100 and standard variable manufacturing overhead which is shown below:-

Budgeted machine hours for 51,500 units = Budgeted machine-hours ÷ Budgeted output units × Actual output units produced

= 17,185 ÷ 49,100 × 51,100

= 17,885 hours

Standard variable manufacturing overhead = Budgeted machine hours for 51,500 units × (Total variable overhead ÷ Total machine hour)

= 17,885 hours × ($360,885 ÷ 17,185)

= 17,885 hours × $21

= $375,585

Flexible-budget variance for variable manufacturing overhead = Standard variable manufacturing overhead - Actual variable manufacturing overhead

= $375,585 - $385,680

= $10,095 Unfavorable

Therefore as per the answer the standard variable is lesser than actual variable manufacturing overhead so it will become unfavorable.