Answer:
D) $73,500U
Explanation:
Variance is the difference between standard and actual costs. Standard cost can also be referred to as Budgeted costs. In the tree of total overhead variance, there are two major branches of variances:- Total Variable Overhead Variance and Total Fixed Overhead Variance. Under the total variable overhead variance are two branches which include Expenditure and Efficiency. The total fixed overhead variance include expenditure and volume and under these a e capacity and efficiency respectively.
In calculating the total fixed overhead variance, the fixed overhead recovery rate, actual production and actual fixed overhead are needed. This can be denoted as: FORR × AP - FO(A). (A) represents at actual. To calculate for the Fixed Overhead Recovery Rate(F.O.R.R), the fixed overhead is divided by standard units.
Now, we can solve the problem using the above stated formula.
F.O.R.R = $540,000 ÷ 200 units = $2,700.
Therefore, using the formula,
($2,700 × 195 units) - $600,000
= $526,500 - $600,000
= $73,500A. "A" denotes adverse or unfavorable. This occurs when there is a minus in front of the figure. This particular answer suppose to be -$73,500 but due to this being an amount in a currency and not just a random figure, the minus sign is taken away and the "A" sign attached to it. If it had no minus signs in front, the sign "A" will be changed to "F" signifying Favourable
