Luther Manufacturing Company uses a standard cost system and prepared the following budget at normal capacity for October: $\begin{array}{ll}
\text { Direct labor hours } & 24,000 \
\text { Variable OH } & \$ 48,000 \
\text { Fixed OH } & \$ 108,000 \
\text { Total OH per DLH } & \$ 6.50\\
\textbf { Actual data for October were as follows: }\
\text { Direct labor houss worked } & 22,000 \
\text { Total OH } & \$ 147,000 \
\text { Standard DLHs allowed for capacity attained } & 21,000
\end{array}$ Using the two-way analysis of overhead variances,what is the controllable variance for October?
A)$3,000 F
B)$5,000 F
C)$9,000 F
D)$10,500 U

Question

Quizplus · Accepted Answer

The controllable variance is the difference between the actual overhead costs and the budgeted overhead costs at the actual level of activity. In this case, the actual overhead costs were $147,000 and the budgeted overhead costs at the actual level of activity were $140,000 (22,000 DLHs x $6.50 per DLH). Therefore, the controllable variance is $7,000 F.

Luther Manufacturing Company Uses a Standard Cost System and Prepared