Asked by Josie Pagnucco on Jul 28, 2024
Verified
When does budgeted fixed overhead differ from applied fixed overhead? (Assume the number of machine hours is the activity base.)
A) During any period in which the number of standard machine hours allowed differs from the budgeted or planned activity level.
B) It always differs.
C) During any period in which actual overhead costs exceed planned overhead costs.
D) During any period in which budgeted production equals planned production.
Budgeted Overhead
The estimated cost of overhead expenses planned for a specific period, including items such as utilities, rent, and indirect labor.
Applied Fixed Overhead
The portion of fixed overhead costs allocated to individual units of production based on a predetermined rate.
Machine Hours
A measure of the amount of time a machine is in operation, used for allocating costs in manufacturing.
- Gain insight into how different levels of production affect budget preparations and cost deviations.
- Conduct analysis and provide explanations for variances in overhead, highlighting budget, volume, efficiency, and spending discrepancies.
Verified Answer
MG
munish guptaJul 30, 2024
Final Answer :
A
Explanation :
Budgeted fixed overhead is based on a predetermined level of activity, which is usually measured in machine hours. If the actual number of machine hours used differs from the budgeted level of machine hours, then the budgeted fixed overhead will differ from the applied fixed overhead. In other words, if the company does not use the expected amount of machine hours, then the budgeted fixed overhead will not match up with the actual fixed overhead applied to production.
Learning Objectives
- Gain insight into how different levels of production affect budget preparations and cost deviations.
- Conduct analysis and provide explanations for variances in overhead, highlighting budget, volume, efficiency, and spending discrepancies.