Rich Company, which uses a standard cost system, budgeted $800,000 of fixed overhead when 50,000 machine hours were anticipated. Other data for the period were:
Actual units produced: 10,600
Actual machine hours worked: 51,800
Actual variable overhead incurred: $475,000
Actual fixed overhead incurred: $790,100
Standard variable overhead rate per machine hour: $8.50
Standard production time per unit: 5 hours
Rich's fixed-overhead budget variance is:
A) $9,900U.
B) $9,900F.
C) $28,800U.
D) $28,800F.
E) None of the other answers are correct.

Question

Quizplus · Accepted Answer

To calculate the fixed overhead budget variance, we need to compare the actual fixed overhead incurred with the budgeted fixed overhead.

Budgeted fixed overhead = $800,000 (given)

Actual fixed overhead = $790,100 (given)

Therefore, the fixed overhead budget variance can be calculated as follows:

Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead
= $800,000 - $790,100
= $9,900 F (Favorable variance)

Hence, the correct answer is B) $9,900F.

Rich Company, Which Uses a Standard Cost System, Budgeted $800,000