Baker Company has a standard and flexible budgeting system and uses a two-variance analysis of factory overhead.Selected data for the June production activity follows: The production-volume variance for June is:

Question

Baker Company has a standard and flexible budgeting system and uses a two-variance analysis of factory overhead.Selected data for the June production activity follows:  The production-volume variance for June is:

Quizplus · Accepted Answer

Based on the given data, the actual factory overhead for June is $25,000, while the flexible budget for this production level is $23,500. Therefore, the flexible-budget variance is favorable $1,500 ($23,500 - $25,000 = $1,500). The production-volume variance is calculated by comparing the flexible budget for the actual level of production with the standard budget for the expected level of production. Since the expected level of production for June is 10,000 units and the actual level produced is 9,000 units, there is a production volume variance of $3,000 unfavorable. Therefore, the total variance for factory overhead is $1,500 unfavorable ($1,500 favorable flexible-budget variance - $3,000 unfavorable production-volume variance = $1,500 unfavorable total variance).

Baker Company Has a Standard and Flexible Budgeting System and Uses