Frekko Company collected the following information:
$\begin{array}{lr}
\text { Standard costs per unit: }\
\text { Variable overhead } & 4 \text { machine hours @\$6 per machine hour } \
\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }
\end{array}$

$\begin{array}{l}
\text { Actual output }&20,000 \text { units } \
\text { Denominator (normal capacity) output } & 21,000 \text { units } \
\text { Actual machine hours } & 79,000 \text { machine hours } \
\text { Actual variable overhead cost } & \$ 540,000 \
\text { Actual fixed overhead cost } & \$ 810,000
\end{array}$
-Refer to the figure.Using the two variance method,what is the total variance?
A)$30,000 (F)
B)$30,000 (U)
C)$70,000 (F)
D)$70,000 (U)

Question

Frekko Company collected the following information:
$\begin{array}{lr}
\text { Standard costs per unit: }\
\text { Variable overhead } & 4 \text { machine hours @\$6 per machine hour } \
\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }
\end{array}$

$\begin{array}{l}
\text { Actual output }&20,000 \text { units } \
\text { Denominator (normal capacity) output } & 21,000 \text { units } \
\text { Actual machine hours } & 79,000 \text { machine hours } \
\text { Actual variable overhead cost } & \$ 540,000 \
\text { Actual fixed overhead cost } & \$ 810,000
\end{array}$
-Refer to the figure.Using the two variance method,what is the total variance?
A)$30,000 (F)
B)$30,000 (U)
C)$70,000 (F)
D)$70,000 (U)

Quizplus · Accepted Answer

The total variance is the sum of the variable overhead variance and the fixed overhead variance. Variable overhead variance:Standard cost = 4 hours/unit * $6/hour = $24/unitStandard cost for actual output = 20,000 units * $24/unit = $480,000Actual variable overhead cost = $540,000Variable overhead variance = $540,000 - $480,000 = $60,000 (U)Fixed overhead variance:Standard cost = 4 hours/unit * $10/hour = $40/unitStandard cost for normal capacity = 21,000 units * $40/unit = $840,000Actual fixed overhead cost = $810,000Fixed overhead variance = $810,000 - $840,000 = $30,000 (F)Total variance = $60,000 (U) + $30,000 (F) = $30,000 (U)

Frekko Company Collected the Following Information -Refer to the Figure