Robert Inc.uses the standard costing method.The company's main product is a fine-quality headphones that normally takes 0.5 hour to produce.Normal annual capacity is 5,000 direct labor hours,and budgeted fixed overhead costs for the year were $8,750.During the year,the company produced and sold 5,800 units.Actual fixed overhead costs were $6,000.
-Using the information provided for Robert Inc,compute the fixed overhead cost variance.
A)$2,750 (F)
B)$925 (U)
C)$3,675 (U)
D)$5,800 (U)

Question

Robert Inc.uses the standard costing method.The company's main product is a fine-quality headphones that normally takes 0.5 hour to produce.Normal annual capacity is 5,000 direct labor hours,and budgeted fixed overhead costs for the year were $8,750.During the year,the company produced and sold 5,800 units.Actual fixed overhead costs were $6,000. 
-Using the information provided for Robert Inc,compute the fixed overhead cost variance.
A)$2,750 (F)
B)$925 (U)
C)$3,675 (U)
D)$5,800 (U)

Quizplus · Accepted Answer

Fixed overhead cost variance = actual fixed overhead costs - budgeted fixed overhead costs 
Fixed overhead cost variance = $6,000 - ($8,750/5,000 direct labor hours * 5,800 units * 0.5 DLH per unit) 
Fixed overhead cost variance = $6,000 - $7,675 
Fixed overhead cost variance = $1,675 
Since the actual fixed overhead costs were less than the budgeted fixed overhead costs, the variance is unfavorable or unfavorable. Therefore, the best choice is B) $925 (U).