Eminem, Inc.manufactures music CDs.At the start of 2017, Eminem planned to produce 108,000 CDs for which the standard cost for each CD is: $\begin{array}{lr}
\text { Plastic (0.25 pounds at } \$ 6.00 \text { per pound) } & \$ 1.50 \
\text { Labor }(0.10 \text { hour at } \$ 12.00 \text { per hour) } & 1.20 \
\text { Overhead ( } \$ 0.80 \text { fixed and } \$ 0.60 \text { variable) } & \underline{1.40} \
\text { Total } & \$ \underline{\underline{4.10}}
\end{array}$ Overhead is allocated based on the number of units produced.Eminem isolates material purchase variances at the point of purchase.The following information summarizes Eminem's results for 2017: $\begin{array}{lr}
\text { Actual production } & 110,000 \text { CDs } \
\text { Actual variable overhead } & \$ 65,000 \
\text { Actual fixed overhead } & \$ 83,000
\end{array}$
How much is the controllable overhead variance for 2017?

Question

Quizplus · Accepted Answer

Controllable overhead variance is the difference between actual variable overhead and budgeted variable overhead. Budgeted variable overhead is equal to the standard variable overhead rate multiplied by the actual production. The standard variable overhead rate is $0.60 per unit, and the actual production is 110,000 units. Therefore, the budgeted variable overhead is $0.60 * 110,000 = $66,000. The actual variable overhead is $65,000. Therefore, the controllable overhead variance is $66,000 - $65,000 = $1,000 favorable.

Eminem, Inc Overhead Is Allocated Based on the Number of Units Produced