Question

Windell Company uses flexible budgets. At normal capacity of 8,000 units, budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. If Windell had actual overhead costs of $250,000 for 9,000 units produced, what is the difference between actual and budgeted costs if a flexible budget is used?
A : $6,000 unfavorable

B : $2,000 favorable

C : $8,000 favorable

D : $2,000 unfavorable

Answer 1

Answer:

The correct answer is B.

Explanation:

Giving the following information:

Windell Company uses flexible budgets. At a normal capacity of 8,000 units, budgeted manufacturing overhead is $64,000 variable and $180,000 fixed. If Windell had actual overhead costs of $250,000 for 9,000 units produced.

First, we need to calculate the estimated manufactured overhead rate and the allocation moh:

Variable Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 64,000/8,000= 8

Allocated moh= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated moh= 8*9,000= 72,000

Over/under allocation= real MOH - allocated MOH

Over/under allocation= 250,000 - (72,000 + 180,000)= 2,000 favorable