Jaune 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's operations: $\begin{array} { l r }
\text { Budgeted Fixed Overhead Costs } & \$ 5,000 \
\text { Actual Fixed Overhead Costs } & \$ 5,500 \
\text { Standard Hours Allowed for Output } & 2,400 \mathrm { DLHs } \
\text { Predetermined Overhead Rate (\$2 variable } + \$ 3 \text { fixed) } & \$ 5 \text { per DLH }
\end{array}$ What was the fixed overhead budget variance?
A) $500 favourable.
B) $500 unfavourable.
C) $1,700 unfavourable.
D) $2,200 unfavourable.

Question

Jaune 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's operations: $\begin{array} { l r } 
\text { Budgeted Fixed Overhead Costs } & \$ 5,000 \
\text { Actual Fixed Overhead Costs } & \$ 5,500 \
\text { Standard Hours Allowed for Output } & 2,400 \mathrm { DLHs } \
\text { Predetermined Overhead Rate (\$2 variable } + \$ 3 \text { fixed) } & \$ 5 \text { per DLH }
\end{array}$ What was the fixed overhead budget variance?
A) $500 favourable.
B) $500 unfavourable.
C) $1,700 unfavourable.
D) $2,200 unfavourable.

Quizplus · Accepted Answer

The fixed overhead budget variance is calculated as the difference between the actual fixed overhead costs and the budgeted fixed overhead costs. 
Fixed overhead budget variance = Actual fixed overhead costs - Budgeted fixed overhead costs 
Fixed overhead budget variance = $5,500 - $5,000 
Fixed overhead budget variance = $500 unfavourable

Jaune Company Uses a Standard Cost System That Applies Manufacturing