Bavaria's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead,$348,000;fixed overhead,$600,000.
The company actually worked 43,000 hours,and actual overhead incurred was: variable,$365,500;fixed,$608,000.
Required:
A.Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance.
B.Repeat part "A" assuming the use of a flexible budget.
C.Flexible budgets are preferred in performance evaluations.The use of flexible budgets eliminates volume differences between actual and budgeted activity,allowing the analyst to concentrate on differences between actual and budgeted costs "on the same,level playing field." The result is a clearer picture to study.
C.Which of the two budgets (static or flexible)is preferred for performance evaluations? Why?

Question

Quizplus · Accepted Answer

The Answer of Bavaria's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead,$348,000;fixed overhead,$600,000.
The company actually worked 43,000 hours,and actual overhead incurred was: variable,$365,500;fixed,$608,000.
Required:
A.Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance.
B.Repeat part "A" assuming the use of a flexible budget.
C.Flexible budgets are preferred in performance evaluations.The use of flexible budgets eliminates volume differences between actual and budgeted activity,allowing the analyst to concentrate on differences between actual and budgeted costs "on the same,level playing field." The result is a clearer picture to study.
C.Which of the two budgets (static or flexible)is preferred for performance evaluations? Why?

Bavaria's Budget for Variable Overhead and Fixed Overhead Revealed the Following