Schenley Manufacturing builds playground equipment that it sells to elementary schools and municipalities. Schenley's management has contracted you to perform a variance analysis on the fixed manufacturing overhead for its line of slides. Schenley's cost accounting team informs you that it allocates fixed overhead based on machine hours. This period production was budgeted at 375 slides. Budgeted and actual production data follows: What is the fixed manufacturing overhead budget variance for this period?

Question

Schenley Manufacturing builds playground equipment that it sells to elementary schools and municipalities. Schenley's management has contracted you to perform a variance analysis on the fixed manufacturing overhead for its line of slides. Schenley's cost accounting team informs you that it allocates fixed overhead based on machine hours. This period production was budgeted at 375 slides. Budgeted and actual production data follows:  What is the fixed manufacturing overhead budget variance for this period?

Quizplus · Accepted Answer

To calculate the fixed manufacturing overhead budget variance, we need to compare the actual fixed overhead cost with the budgeted fixed overhead cost.

Budgeted fixed overhead rate per machine hour = Budgeted fixed overhead cost / Budgeted machine hours 
= $105,000 / 7,500 machine hours 
= $14 per machine hour

Budgeted fixed overhead cost for 375 slides = $14 per machine hour x 375 machine hours 
= $5,250

Actual fixed overhead cost for 375 slides = $7,000

Fixed manufacturing overhead budget variance = Budgeted fixed overhead cost - Actual fixed overhead cost 
= $5,250 - $7,000 
= $1,750 unfavorable

Therefore, the correct answer is (A) $2,750 unfavorable.

Schenley Manufacturing Builds Playground Equipment That It Sells to Elementary