Bartoletti Fabrication Corporation has a standard cost system in which it applie

Question

Bartoletti Fabrication Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company's cost formula for variable manufacturing overhead is $4.60 per MH. The company had budgeted its fixed manufacturing overhead cost at $65,000 for the month. During the month, the actual total variable manufacturing overhead was $22,080 and the actual total fixed manufacturing overhead was $63,000. The actual level of activity for the period was 4,600 MHs. What was the total of the variable overhead spending and fixed overhead budget variances for the month? (Points : 2) $1,080 unfavorable $1,080 favorable $920 unfavorable $920 favorable

Explanation / Answer

Answer:$1,080 favorable

Actual rate = Actual variable manufacturing overhead ÷ Actual machine-hours

= $22,080 ÷ 4,600 = $4.80

Variable overhead spending variance = AH × (AR SR)

= 4,600 × ($4.80 $4.60)= 4,600 × $0.20

= $920 U

Fixed overhead budget variance= Actual fixed overhead costs Budgeted fixed overhead cost

= $63,000 $65,000 = $2,000 F

Total overhead variance = $920 U + $2,000 F

= $1,080 F

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