Mauve Company uses a standard cost system that applies manufacturing overhead to units of product on the basis of direct labour hours (DLHs).The following data pertain to last month: $\begin{array} { l r }
\text { Actual Hours Worked } & 2,400 \mathrm { DLHs } \
\text { Budgeted Fixed Overhead Costs } & \$ 10,000 \
\text { Actual Fixed Overhead Costs } & \$ 10,400 \
\text { Standard Hours Allowed } & 2,500 \mathrm { DLHs } \
\text { Predetermined Overhead Rate } & \$ 5 \text { per DLH }
\end{array}$
What was the fixed overhead budget variance?
A) $300 favourable.
B) $300 unfavourable.
C) $400 unfavourable.
D) $500 favourable.

Question

Mauve Company uses a standard cost system that applies manufacturing overhead to units of product on the basis of direct labour hours (DLHs).The following data pertain to last month: $\begin{array} { l r } 
\text { Actual Hours Worked } & 2,400 \mathrm { DLHs } \
\text { Budgeted Fixed Overhead Costs } & \$ 10,000 \
\text { Actual Fixed Overhead Costs } & \$ 10,400 \
\text { Standard Hours Allowed } & 2,500 \mathrm { DLHs } \
\text { Predetermined Overhead Rate } & \$ 5 \text { per DLH }
\end{array}$
 What was the fixed overhead budget variance?
A) $300 favourable.
B) $300 unfavourable.
C) $400 unfavourable.
D) $500 favourable.

Quizplus · Accepted Answer

The fixed overhead budget variance is the difference between the actual fixed overhead costs and the budgeted fixed overhead costs. Here, it is $10,400 (actual) - $10,000 (budgeted) = $400 unfavourable.

Mauve Company Uses a Standard Cost System That Applies Manufacturing