Figure 16-5
Torino, SA., manufactures machine parts. Torino has developed a static budget for its plant at an activity level of 10,000 direct labour hours for the month of March. The actual level of activity was 11,000 hours. The following table summarizes the static budget and the actual costs for March: $\begin{array}{lccc}
&\text { Static Budget } &\text { Actual Costs }\
& (10,000 \mathrm{DLH})& (11,000 \mathrm{DLH}) & \text {Variance}\
\text { Variable costs } & £ 21,000 & £ 22,000 & £ 1,000 \mathrm{U} \
\text { Fixed costs } & 7,800 & 7,700 & 100 \mathrm{~F} \
\text { Total } & £ 28,800 & £ 29,700 & £ 900\mathrm{U} \
\end{array}$
-Refer to Figure 16-5. Which of the following describes the flexible budget variance for March?
A)The fixed overhead variance is £100 F.
B)The variable overhead variance is £1,000 U.
C)The variable overhead variance is £1,100 F.
D)both a and c

Question

Figure 16-5
Torino, SA., manufactures machine parts. Torino has developed a static budget for its plant at an activity level of 10,000 direct labour hours for the month of March. The actual level of activity was 11,000 hours. The following table summarizes the static budget and the actual costs for March: $\begin{array}{lccc}
&\text { Static Budget } &\text { Actual Costs }\
& (10,000 \mathrm{DLH})& (11,000 \mathrm{DLH}) & \text {Variance}\
 \text { Variable costs } & £ 21,000 & £ 22,000 & £ 1,000 \mathrm{U} \
 \text { Fixed costs } & 7,800 & 7,700 & 100 \mathrm{~F} \
 \text { Total } & £ 28,800 & £ 29,700 & £  900\mathrm{U} \ 
\end{array}$  
-Refer to Figure 16-5. Which of the following describes the flexible budget variance for March?
A)The fixed overhead variance is £100 F.
B)The variable overhead variance is £1,000 U.
C)The variable overhead variance is £1,100 F.
D)both a and c

Quizplus · Accepted Answer

- The fixed overhead variance is calculated as the difference between the actual fixed overhead cost and the budgeted fixed overhead cost. In this case: £11,500 (actual) - £11,600 (budgeted) = £100 F.
- The variable overhead variance is calculated as the difference between the actual variable overhead cost and the flexible budget variable overhead based on the actual activity level. In this case: £22,100 (actual) - £21,000 (flexible budget) = £1,100 F.

Figure 16-5 Torino, SA -Refer to Figure 16-5

Figure 16-5
Torino, SA -Refer to Figure 16-5