If applied fixed manufacturing overhead was $156,100 and there was a $3,900 favorable budget variance and a $3,000 unfavorable volume variance, budgeted fixed manufacturing overhead must have been:
A) $159,100
B) $163,000
C) $152,200
D) $160,000

Question

Quizplus · Accepted Answer

The budgeted fixed manufacturing overhead can be calculated by adjusting the applied fixed manufacturing overhead for the variances. Since there was a $3,900 favorable budget variance, it means the actual overhead was less than budgeted, so you add this to the applied overhead. The $3,000 unfavorable volume variance means that the company applied less overhead than it had budgeted for based on the volume of production, so you subtract this from the applied overhead. Therefore, $156,100 + $3,900 - $3,000 = $157,000, which is not an option provided, indicating a mistake in the calculation or the interpretation of the options. Correcting the interpretation based on the provided options, the closest and correct approach to find the budgeted amount involves initially adding the favorable budget variance to the applied overhead, suggesting a calculation error in the explanation. The correct calculation, considering the nature of variances, should directly relate to how these variances adjust the applied overhead to reflect the budgeted amount, which is not accurately captured in the initial explanation. Given the options and the typical approach to adjust for variances, the correct answer should reflect the budgeted amount before any variances occurred, which is not directly calculable from the incorrect explanation provided.

If Applied Fixed Manufacturing Overhead Was $156,100 and There Was