Herman Company,which applies overhead to production on the basis of machine hours,reported the following data for the period just ended:
Actual units produced: 13,000
Actual fixed overhead incurred: $742,000
Standard fixed overhead rate: $15 per hour
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 48,000
If Herman estimates four hours to manufacture a completed unit,the company's fixed-overhead budget variance would be:
A)$22,000 favorable.
B)$22,000 unfavorable.
C)$60,000 favorable.
D)$60,000 unfavorable.
E)some other amount.

Question

Quizplus · Accepted Answer

The fixed-overhead budget variance is calculated as the difference between the actual fixed overhead incurred and the budgeted fixed overhead, using the actual level of machine-hour activity:

Actual machine hours = Actual units produced × Standard hours per unit
Actual machine hours = 13,000 units × 4 hours per unit
Actual machine hours = 52,000 hours

Fixed-overhead budget variance = Actual fixed overhead - Budgeted fixed overhead
Fixed-overhead budget variance = $742,000 - $720,000
Fixed-overhead budget variance = $22,000 unfavorable

Herman Company,which Applies Overhead to Production on the Basis of Machine