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

To calculate the total of the variable overhead rate and fixed manufacturing overhead budget variances, we need to calculate each variance separately and then add them together.

Variable overhead rate variance = (Actual machine-hours * Actual variable overhead rate) - (Actual machine-hours * Standard variable overhead rate) 
= (5,400 MHs * $0.60 per MH) - (5,400 MHs * $0.50 per MH) 
= $540 - $2,700 
= $2,160 unfavorable

Fixed manufacturing overhead budget variance = Actual fixed overhead - Budgeted fixed overhead 
= $16,800 - ($13,500 + $850 * 6,000 MHs) 
= $16,800 - $18,900 
= $2,100 favorable

Total variance = Variable overhead rate variance + Fixed manufacturing overhead budget variance 
= $2,160 unfavorable + $2,100 favorable 
= $4,820 unfavorable

Omary Corporation Has a Standard Cost System in Which It