Question

A company uses flexible budgets. At normal capacity of 8,000 units, budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. If the company had actual overhead costs of $250,000 for 9,000 units produced, what is the difference between actual and budgeted flexible costs? *

Answer 1

Answer:

$2,000 favorable

Explanation:

The computation is shown below:

= Actual overhead cost -  budgeted flexible costs

where,

Actual overhead cost = $250,000

And, the budgeted flexible cost would be

= Number of units produced × variable cost per unit + fixed cost

= 9,000 units × $8 + $180,000

= $72,000 + $180,000

= $252,000

The variable cost per unit would be

= $64,000 ÷ 8,000 units

= $8

So, the difference would be

= $250,000 - $252,000

= $2,000 favorable