Buckingham Company Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours.The following information is available for May when Buckingham produced 4,500 units:

Standard:

DLH per unit 2.50

Variable overhead per DLH $1.75

Fixed overhead per DLH $3.10

Budgeted variable overhead $21,875

Budgeted fixed overhead $38,750

Actual:

Direct labor hours 10,000

Variable overhead $26,250

Fixed overhead $38,000

Refer to Buckingham Company.Using the two-variance approach,what is the noncontrollable variance? A)$3,125 F B)$3,875 U C)$3,875 F D)$6,062 U

Question

Buckingham Company
Buckingham Company uses a standard cost system for its production process and applies overhead based on direct labor hours.The following information is available for May when Buckingham produced 4,500 units:

Standard:
DLH per unit	2.50
Variable overhead per DLH	$1.75
Fixed overhead per DLH	$3.10
Budgeted variable overhead	$21,875
Budgeted fixed overhead	$38,750

Actual:
Direct labor hours	10,000
Variable overhead	$26,250
Fixed overhead	$38,000

Refer to Buckingham Company.Using the two-variance approach,what is the noncontrollable variance? A)$3,125 F B)$3,875 U C)$3,875 F D)$6,062 U

Quizplus · Accepted Answer

The noncontrollable variance, also known as the fixed overhead budget variance, is calculated by comparing the actual fixed overhead to the budgeted fixed overhead. In this case, the actual fixed overhead is $38,000 and the budgeted fixed overhead is $38,750. Therefore, the noncontrollable variance is $38,750 - $38,000 = $750 Favorable (F), not $3,875 Unfavorable (U) as initially indicated. My previous response contained an error in calculation and interpretation. The correct interpretation should focus on the difference between the actual and budgeted fixed overhead costs to determine the variance's nature (favorable or unfavorable) and its magnitude.

Buckingham Company Buckingham Company Uses a Standard Cost System for Its Production