Point Company uses the standard costing method. The company's main product is a fine-quality audio speaker that normally takes 0.25 hour to produce. Normal annual capacity is 3,000 direct labor hours, and budgeted fixed overhead costs for the year were $6,750. During the year, the company produced and sold 8,000 units. Actual fixed overhead costs were $4,800. Compute the fixed overhead variance.
A) $300 (F)
B) $300 (U)
C) $1,950 (U)
D) $2,250 (U)

Question

Quizplus · Accepted Answer

Fixed overhead variance = Actual overhead - Budgeted overhead

= $4,800 - ($6,750/3,000 DLH x 8,000 units x 0.25 hours per unit)

= $4,800 - $5,100

= $300 (U)

Point Company Uses the Standard Costing Method