Goolden Electronics Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs).The company had budgeted its fixed manufacturing overhead cost at $58,000 for the month and its level of activity at 2,500 MHs.The actual total fixed manufacturing overhead was $61,200 for the month and the actual level of activity was 2,600 MHs.What was the fixed manufacturing overhead budget variance for the month to the nearest dollar?
A)$880 Unfavorable
B)$880 Favorable
C)$3,200 Favorable
D)$3,200 Unfavorable

Question

Quizplus · Accepted Answer

Fixed manufacturing overhead budget variance = Actual fixed manufacturing overhead - Budgeted fixed manufacturing overhead
= $61,200 - ($58,000/2,500 MHs x 2,600 MHs)
= $61,200 - $57,440
= $3,760
Since the actual fixed manufacturing overhead is higher than the budgeted amount, the variance is unfavorable. To the nearest dollar, the answer is $3,200 unfavorable (D). Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $61,200 - $58,000
= $3,200 U

Goolden Electronics Corporation Has a Standard Cost System in Which