Price Company's flexible budget shows $10,710 of overhead at 75% of capacity, which was the operating level achieved during May. However, the company applied overhead to production during May at a rate of $2.00 per direct labor hour based on a budgeted operating level of 6,120 direct labor hours (90% of capacity). If overhead actually incurred was $11,183 during May, the controllable variance for the month was:

Question

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The controllable variance is calculated as the difference between the actual overhead incurred and the flexible budget overhead at the actual level of activity. The flexible budget overhead at 75% capacity is $10,710, and the actual overhead incurred is $11,183. The variance is $11,183 - $10,710 = $473 unfavorable.

Price Company's Flexible Budget Shows $10,710 of Overhead at 75