During the period Richeleau produced 1,000 units of product. The flexible budget for standard costs is: Direct materials $43,000
Direct labour 67,000
Variable overhead 30,000
Fixed overhead 25,000
Variances for the period are:
Direct materials price $ 400 U
Direct materials efficiency 500 F
Direct labour price 600 F
Direct labour efficiency 200 U
Variable overhead spending 300 F
Variable overhead efficiency 100 F
Fixed overhead spending 500 F
Fixed overhead production volume 1,000 U
The budgeted fixed overhead was:
A)$25,000
B)$24,000
C)$24,500
D)$23,000

Question

Quizplus · Accepted Answer

The variances given in the question relate only to the variable and fixed overheads. The flexible budget for variable overheads is $30,000 and the actual spending is $300 F, so actual variable overheads are $29,700. The flexible budget for fixed overheads is also $25,000, but with a production volume variance of 1,000 U, the actual fixed overheads are $24,000. Thus, the budgeted fixed overhead is $25,000. The correct answer is option A, $25,000.

During the Period Richeleau Produced 1,000 Units of Product