Question

The following information relating to a company's overhead costs is available. Actual total variable overhead $ 73,000 Actual total fixed overhead $ 17,000 Budgeted variable overhead rate per machine hour $ 2.50 Budgeted total fixed overhead $ 15,000 Budgeted machine hours allowed for actual output 30,000 Based on this information, the total variable overhead variance is:

Answer 1

Answer: $2,000 favorable

Explanation:

Total variable overhead variance = Budgeted variable overhead - Actual total variable overhead

Budgeted variable overhead = Budgeted machine hours allowed for actual output * Budgeted variable overhead rate per machine hour

= 30,000 * 2.50

= $75,000

Total variable overhead variance = 75,000 - 73,000

= $2,000 favorable

Favorable because the actual amount was less than the budgeted one.