The management of Alpha Company has calculated the following variances: When determining the total production cost flexible budget variance, calculate the total manufacturing overhead variance of Alpha Company.
A)$5,000 F
B)$7,000 F
C)$3,050 F
D)$10,050 F

Question

The management of Alpha Company has calculated the following variances:  When determining the total production cost flexible budget variance, calculate the total manufacturing overhead variance of Alpha Company.
A)$5,000 F 
B)$7,000 F 
C)$3,050 F 
D)$10,050 F

Quizplus · Accepted Answer

The total production cost flexible budget variance formula is: Actual Costs - Flexible Budget Costs.

To calculate the total manufacturing overhead variance, we need to determine the actual manufacturing overhead costs and flexible budget manufacturing overhead costs.

Flexible Budget Manufacturing Overhead = 160% x Standard Direct Labor Hours x Standard Overhead Rate
= 160% x 8,000 hours x $6.25/hour
= $80,000

Actual Manufacturing Overhead = $90,000

Total Manufacturing Overhead Variance = Actual Manufacturing Overhead Costs - Flexible Budget Manufacturing Overhead Costs
= $90,000 - $80,000
= $10,000 F

Therefore, the best choice is D ($10,050 F) as there is a $10,000 F variance in manufacturing overhead costs.

The Management of Alpha Company Has Calculated the Following Variances