Mauve Company uses a standard cost system that applies manufacturing overhead to units of product on the basis of direct labour hours (DLHs).The following data pertain to last month:
$\begin{array}{|l|r|}
\hline \text { Actual Hours Worked } & 2,400 \mathrm{DLHs} \
\hline \text { Budgeted Fixed Overhead Costs } & \$ 10,000 \
\hline \text { Actual Fixed Overhead Costs } & \$ 10,400 \
\hline \text { Standard Hours Allowed } & 2,500 \mathrm{DLHs} \
\hline \text { Predetermined Overhead Rate } & \$ 5 \text { per DLH } \
\hline
\end{array}$
What was the fixed overhead budget variance?
A) $300 favourable.
B) $300 unfavourable.
C) $400 unfavourable.
D) $500 favourable.

Question

Quizplus · Accepted Answer

The fixed overhead budget variance is calculated as the difference between the actual fixed overhead costs and the budgeted fixed overhead costs. In this case, it is \$10,400 (actual) - \$10,000 (budgeted) = \$400 unfavourable.

Mauve Company Uses a Standard Cost System That Applies Manufacturing