Answer:
A) $ 1,200 favorable
Explanation:
Computation of variance
Flexible Budget Units 48,000 units
Total variable costs at budget level $ 72,000
Variable costs per unit = $ 72,000/ 48,000 $ 1.50 per unit
Actual Production Units 40,000 units
Total overhead costs
Variable $ 1.50 * 40,000 units $ 60,000
Fixed overhead costs $ 64,000
Total Budgeted overhead costs at 40,000 units $ 124,000
Actual Overhead costs $ 122,800
Variance Favorable $ 1,200
Answer:
A) $ 1,200 favorable
Explanation:
The standard variable overhead cost per unit is equal to
= Variable overhead cost at a given units/number of units
= $72,000 /48,000 units
= $1.5 per unit
Controllable cost variance
$
Standard cost for 40,00 units= ( $1.5 × 40,000) = 60,000
Actual variable overheads (122,800 -64,000) 58,800
Variance 1,200 favourable
Note that we had to deduct $64,000 fixed costs from the total overhead figure because it is uncontrollable.
