Omary Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: What was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month?
A)$1,520 Unfavorable
B)$3,180 Favorable
C)$4,820 Unfavorable
D)$6,340 Unfavorable

Question

Omary Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month:  What was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month?
A)$1,520 Unfavorable 
B)$3,180 Favorable 
C)$4,820 Unfavorable 
D)$6,340 Unfavorable

Quizplus · Accepted Answer

The variable overhead rate variance is calculated as (actual variable overhead rate - standard variable overhead rate) x actual hours worked.

In this case, the variable overhead rate variance is:

(6.50 - 6.00) x 12,000 = $6,000 unfavorable

The fixed manufacturing overhead budget variance is calculated as (actual fixed overhead cost - budgeted fixed overhead cost).

In this case, the fixed manufacturing overhead budget variance is:

(24,800 - 20,000) = $4,800 unfavorable

Therefore, the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month is:

$6,000 unfavorable + $4,800 unfavorable = $10,800 unfavorable

However, the question asks for the total of the variances, not their combined unfavorable amount. Therefore, we need to find the absolute value of the total:

|$10,800| = $10,800

Therefore, the best choice is C, $4,820 unfavorable.

Omary Corporation Has a Standard Cost System in Which It