Question

Stone Industries uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $48,000 variable and $270,000 fixed. If Stone had actual overhead costs of $321,000 for 18,000 units produced, what is the difference between actual and budgeted costs?

Answer 1

Answer:

$3,000 favorable

Explanation:

The computation of actual and budgeted costs is shown below:-

                    Budgeted                                     Actual

                    (18,000 units)                             (18,000 units)

Variable        $54,000

                    ($48,000 ÷ $16,000) × $18,000

Fixed            $270,000

Total              $324,000                                   $321,000

Therefore, Actual cost is less than Budgeted, so the difference between actual and budgeted costs is $3,000 is favorable.