Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the expected (planned)capacity variance?
A)$5,600 unfavorable
B)$25,000 unfavorable
C)$30,000 unfavorable
D)$35,600 unfavorable

Question

Quizplus · Accepted Answer

The expected (planned) capacity variance is calculated as follows:

Budgeted Fixed Overhead - (Actual Production * Fixed Overhead per Unit)

Fixed Overhead per Unit = Budgeted Fixed Overhead / Practical Capacity = $150,000 / 6,000 = $25

Budgeted Fixed Overhead = $150,000

Actual Production = 4,800 units

Fixed Overhead per Unit = $25

$150,000 - (4,800 * $25) = $25,000 unfavorable variance

Therefore, the expected (planned) capacity variance is $25,000 unfavorable, which is option B.

Warner CoHas Budgeted Fixed Overhead of $150,000