Prevlar's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead, $348,000; fixed overhead, $600,000.
The company actually worked 43,000 hours and actual overhead incurred was: variable, $365,500; fixed, $608,000.
Required:
A. Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance.
B. Repeat part "A" assuming the use of a flexible budget.
C. Which of the two budgets (static or flexible) is preferred for performance evaluations? Why?

Question

Prevlar's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead, $348,000; fixed overhead, $600,000.
The company actually worked 43,000 hours and actual overhead incurred was: variable, $365,500; fixed, $608,000.
Required: 
A. Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance.
B. Repeat part "A" assuming the use of a flexible budget.
C. Which of the two budgets (static or flexible) is preferred for performance evaluations? Why?

Quizplus · Accepted Answer

The Answer of Prevlar's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead, $348,000; fixed overhead, $600,000.
The company actually worked 43,000 hours and actual overhead incurred was: variable, $365,500; fixed, $608,000.
Required: 
A. Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance.
B. Repeat part "A" assuming the use of a flexible budget.
C. Which of the two budgets (static or flexible) is preferred for performance evaluations? Why?

Prevlar's Budget for Variable Overhead and Fixed Overhead Revealed the Following