HSS Company provides security services to senior executives of prominent corporations when they travel outside the United States. HSS applies both fixed and variable overhead using direct labor hours. The annual budget for one if its customers is as follows:
During the year, HSS had the following activity related to this customer:
$\bullet$Actual hours were 850 at a total cost of $44,200.
$\bullet$Actual fixed overhead was $12,750.
$\bullet$Actual variable overhead was $22,950.
What is the overall Flexible Budget Variance?
A) $850 favorable
B) $850 unfavorable
C) $3,900 favorable
D) $3,900 unfavorable
E) None of the above

Question

HSS Company provides security services to senior executives of prominent corporations when they travel outside the United States. HSS applies both fixed and variable overhead using direct labor hours. The annual budget for one if its customers is as follows:
 During the year, HSS had the following activity related to this customer:
$\bullet$Actual hours were 850 at a total cost of $44,200.
$\bullet$Actual fixed overhead was $12,750.
$\bullet$Actual variable overhead was $22,950.
What is the overall Flexible Budget Variance?
A) $850 favorable 
B) $850 unfavorable 
C) $3,900 favorable 
D) $3,900 unfavorable 
E) None of the above

Quizplus · Accepted Answer

Standard Direct Labor Cost: 850 hours x $50/hour = $42,500
Standard Variable Overhead Cost: 850 hours x $30/direct labor hour = $25,500
Standard Fixed Overhead Cost: 850 hours x $15/direct labor hour = $12,750
Total Standard Cost: $80,750
Actual Direct Labor Cost: $44,200
Actual Variable Overhead Cost: $22,950
Actual Fixed Overhead Cost: $12,750
Total Actual Cost: $79,900
Flexible Budget Variance (Actual - Standard): $79,900 - $80,750 = $850 Favorable

HSS Company Provides Security Services to Senior Executives of Prominent ∙\bullet∙

HSS Company Provides Security Services to Senior Executives of Prominent $\bullet$