In the standard costing system using machine-hours (MHs), given budgeted fixed overhead of P120,960 at 6,300 MHs and actual fixed overhead of P122,710, what is the fixed overhead budget variance for the period (nearest peso)? A) P137 F B) P1,750 U C) P7,850 U D) P7,507 F
A manufacturing company has a standard costing system based on standard machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity - 6,300 MHs
Overhead costs at the denominator activity level:
Variable overhead cost - P34,020
Fixed overhead cost - P120,960
The following data pertain to operations for the most recent period:
Actual hours - 6,800 MHs
Standard hours allowed for the actual output - 6,384 MHs
Actual total variable overhead cost - P38,080
Actual total fixed overhead cost - P122,710
The fixed overhead budget variance is $\text{Actual fixed OH} - \text{Budgeted fixed OH} = P122{,}710 - P120{,}960 = P1{,}750$ unfavorable. So the correct choice is B) P1,750 U.
What this variance is asking for
The fixed overhead budget variance checks whether you spent more or less fixed overhead than the amount budgeted for the period. For this variance, the activity level in machine-hours does not change the fixed overhead budget.
Identify the two numbers you compare
- Budgeted fixed manufacturing overhead (from the flexible budget): $P120{,}960$
- Actual fixed manufacturing overhead (for the period): $P122{,}710$
Compute the fixed overhead budget variance
Use: $$\text{Fixed OH budget variance} = \text{Actual fixed OH} - \text{Budgeted fixed OH}$$
Substitute: $$= P122{,}710 - P120{,}960 = P1{,}750$$
Decide whether it is favorable or unfavorable
Because actual fixed overhead is higher than the budgeted fixed overhead, the variance is unfavorable (U).
So the answer is B) P1,750 U.
- Direct Labor Efficiency Variance (Swan Company)
- Replace vs Keep Machine: 4-Year Cash Flow Comparison
- May COGS and Ending Inventory in Job Order Costing
- Standard Cost Variance Journal Entries (Materials & Labor)
- Weighted-Average Process Costing: Grinding Dept (May)
- Direct Labor Cost in June for Jobs 602, 603, 604
- Make-or-Buy Bread: Non-Financial Factors to Consider
- Segment A Operating Profit With Common Cost Allocation
Comments (0)
Please to leave a comment.