TJC Limited allocates a standard £5.00 fixed overhead cost to Product J on the basis that 5,000 units of Product J are produced each month. 5,500 units of Product J were produced in July resulting in an unfavourable fixed overhead expenditure variance of £1,000. What was the actual fixed overhead expenditure during July?
A) £24,000
B) £26,000
C) £26,500
D) £28,500

Question

Quizplus · Accepted Answer

The fixed overhead expenditure variance is calculated as the difference between the budgeted fixed overheads and the actual fixed overheads. Given that the variance is unfavourable by £1,000, it means the actual fixed overheads were £1,000 more than the budgeted. The budgeted fixed overheads for 5,000 units at £5.00 per unit is £25,000 (£5.00 * 5,000 units). Therefore, the actual fixed overhead expenditure was £25,000 + £1,000 = £26,000.

TJC Limited Allocates a Standard £5