Accounting
The standard costs and actual costs for factory overhead for the manufacture of 2,500 units of actual production are as follows:
StandardCosts
Fixed overhead (based on 10,000 hours) 3 hours @ $.80 per hour
Variable overhead3 hours @ $2.00 per hour
Actual Costs
Total variable cost, $18,000
Total fixed cost, $8,000
The amount of the factory overhead controllable variance is:
A.$2,000 unfavorable
B.$3,000 favorable
C.$0
D.$3,000 unfavorable
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Answers
The amount of the factory overhead controllable variance is $3,000 unfavorable. This can be calculated by subtracting the actual fixed and variable costs from the standard fixed and variable costs. The standard fixed cost for 10,000 hours is $2,400 and the actual fixed cost is $8,000, so the fixed cost variance is $5,600 unfavorable. The standard variable cost for 10,000 hours is $20,000 and the actual variable cost is $18,000, so the variable cost variance is $2,000 favorable. The combined controllable variance is then $3,000 unfavorable ($5,600 unfavorable - $2,000 favorable).
