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 total fixed overhead capacity variance?
A)$5,000 unfavorable
B)$5,600 unfavorable
C)$25,000 unfavorable
D)$30,000 unfavorable

Question

Quizplus · Accepted Answer

The capacity variance is calculated as the difference between the budgeted fixed overhead based on practical capacity and the actual fixed overhead incurred. The practical capacity is 6,000 units, so the budgeted fixed overhead is $150,000. The actual fixed overhead incurred is $155,600. The variance is $155,600 - $150,000 = $5,600 unfavorable. However, the correct calculation should consider the difference between the budgeted fixed overhead for the actual production (4,800 units) and the practical capacity (6,000 units), leading to a $30,000 unfavorable variance.

Warner CoHas Budgeted Fixed Overhead of $150,000