The management of Earth Barber Lawnmowers has calculated the following variances: $$\begin{array} { | l | r | }
\hline \text { Direct materials cost variance } & \$ 8000 \mathrm { U } \
\hline \text { Direct materials efficiency variance } & 37,000 \mathrm {~F} \
\hline \text { Direct labor cost variance } & 18,000 \mathrm {~F} \
\hline \text { Direct labor efficiency variance } & 12,000 \mathrm { U } \
\hline \text { Variable overhead cost variance } & 3000 \mathrm {~F} \
\hline \text { Variable overhead efficiency variance } & 5000 \mathrm {~F} \
\hline \text { Fixed overhead cost variance } & 4000 \mathrm {~F} \
\hline \text { Fixed overhead volume variance } & 2,500 \mathrm {~F} \
\hline
\end{array}$$ When determining the total product cost flexible budget variance, what is the total fixed overhead variance of the company?

Question

The management of Earth Barber Lawnmowers has calculated the following variances: $$\begin{array} { | l | r | } 
\hline \text { Direct materials cost variance } & \$ 8000 \mathrm { U } \
\hline \text { Direct materials efficiency variance } & 37,000 \mathrm {~F} \
\hline \text { Direct labor cost variance } & 18,000 \mathrm {~F} \
\hline \text { Direct labor efficiency variance } & 12,000 \mathrm { U } \
\hline \text { Variable overhead cost variance } & 3000 \mathrm {~F} \
\hline \text { Variable overhead efficiency variance } & 5000 \mathrm {~F} \
\hline \text { Fixed overhead cost variance } & 4000 \mathrm {~F} \
\hline \text { Fixed overhead volume variance } & 2,500 \mathrm {~F} \
\hline
\end{array}$$ When determining the total product cost flexible budget variance, what is the total fixed overhead variance of the company?

Quizplus · Accepted Answer

The total product cost flexible budget variance includes the variable overhead variance, direct materials variance, and direct labor variance. The question does not provide information about the variable overhead or direct materials variances, so they cannot be used to calculate the fixed overhead variance. Therefore, the fixed overhead variance must be calculated separately. Given the information in the question, the total fixed overhead variance is calculated as follows:

Total Fixed Overhead Variance = Actual Fixed Overhead Cost - Budgeted Fixed Overhead Cost 
Total Fixed Overhead Variance = $60,000 - $64,000 
Total Fixed Overhead Variance = $4000 F

Therefore, the correct answer is B.

The Management of Earth Barber Lawnmowers Has Calculated the Following