Goolden Electronics Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs) .The company had budgeted its fixed manufacturing overhead cost at $58,000 for the month and its level of activity at 2,500 MHs.The actual total fixed manufacturing overhead was $61,200 for the month and the actual level of activity was 2,600 MHs.What was the fixed manufacturing overhead budget variance for the month to the nearest dollar?

A) $880 Unfavorable
B) $880 Favorable
C) $3,200 Favorable
D) $3,200 Unfavorable

Question

Orlando Mejia · Accepted Answer

Final Answer : D, Explanation :  Fixed manufacturing overhead budget variance = Actual fixed manufacturing overhead - Budgeted fixed manufacturing overhead= $61,200 - ($58,000/2,500 MHs x 2,600 MHs)= $61,200 - $57,440= $3,760Since the actual fixed manufacturing overhead is higher than the budgeted amount, the variance is unfavorable. To the nearest dollar, the answer is $3,200 unfavorable (D). Budget variance = Actual fixed overhead - Budgeted fixed overhead cost= $61,200 - $58,000= $3,200 U

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