Question

A company's flexible budget for the range of 26,000 units to 40,000 units of production showed variable overhead costs of $3.80 per unit and fixed overhead costs of $69,000. The company incurred total overhead costs of $169,400 while operating at a volume of 40,000 units. The total controllable cost variance is:

Answer 1

Answer:

Controllable cost variance   = $51,600.  favourable

Explanation:

The controllable cot variance is the difference between the the standard controllable cost for the actual output and the actual controllable cost

                                                                                                $

Standard controllable cost for the output achieved      

( $3.80 × 40,000)                                                       =     152,000

Actual controllable cost (169,400-69,000)            =        100,400

Controllable cost variance                                               51,600. Favorable

                                   

Note that the fixed cost  of $69,000 is not a controllable cost, hence it is deducted from the total overhead cost