Levelor Company's flexible budget shows $10,710 of overhead at 75% of capacity,which was the operating level achieved during May.However,the company applied overhead to production during May at a rate of $2.00 per direct labor hour based on a budgeted operating level of 6,120 direct labor hours (90% of capacity).If overhead actually incurred was $11,183 during May,the controllable variance for the month was:

Question

Quizplus · Accepted Answer

The controllable variance is calculated as the difference between the actual overhead incurred and the flexible budget overhead at the actual level of activity. The flexible budget overhead at 75% capacity is $10,710, and the actual overhead incurred is $11,183. The variance is $11,183 - $10,710 = $473, which is unfavorable because the actual overhead is higher than the budgeted amount.

Levelor Company's Flexible Budget Shows $10,710 of Overhead at 75