An outdoor barbecue grill manufacturer has a standard costing system based on st

Question

An outdoor barbecue grill manufacturer has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

Denominator level of activity............................... 3,900 DLHs
Fixed overhead cost.......................................... $49,530

The following data pertain to operations for the most recent period:

Actual hours................................................... 3,800 DLHs
Standard hours allowed for the actual output....... 3,861 DLHs
Actual total fixed manufacturing overhead cost.... $50,230

What was the fixed manufacturing overhead budget variance for the period to the nearest dollar?



a. $806 U

b. $700 U

c. $1,970 F

d. $1,195 F

Explanation / Answer

fixed manufacturing overhead budget variance = difference between the actual fixed overhead incurred and the amount of fixed overhead that had been budgeted $50,230 - $49,530 = $700 Actual > Budgeted = Unfavorable Answer - b. $700 U

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