Use the following to answer questions:
Grachev Co. manufactures hedge clippers, its only product. The following information relates to the
company's manufacturing overhead
for an output of 20,000 clippers:

-What is the variable manufacturing overhead static budget variance (i.e. a flexible budget is not used)?
A) $ 8,750 unfavorable
B) $ 8,750 favorable
C) $76,250 favorable
D) $76,250 unfavorable

Question

Use the following to answer questions:
Grachev Co. manufactures hedge clippers, its only product. The following information relates to the
company's manufacturing overhead
for an output of 20,000 clippers:
 
-What is the variable manufacturing overhead static budget variance (i.e. a flexible budget is not used)?
A) $ 8,750 unfavorable 
B) $ 8,750 favorable 
C) $76,250 favorable 
D) $76,250 unfavorable

Quizplus · Accepted Answer

The variable manufacturing overhead static budget variance is calculated by comparing the actual overhead costs to the budgeted amounts without adjusting for the actual level of activity. If the actual costs are higher than the budgeted, the variance is unfavorable. The specific numbers provided in the options suggest that the calculation has led to a variance of $76,250 being unfavorable, indicating that the actual overhead costs exceeded the budgeted amounts by this figure.

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