Benson Company, which uses a standard cost system, budgeted $600,000 of fixed overhead when 40,000 machine hours were anticipated. Other data for the period were:
Actual units produced: 10,000
Standard production time per unit: 3.9 machine hours
Fixed overhead incurred: $620,000
Actual machine hours worked: 42,000
Benson's fixed-overhead budget variance is:
A) $10,000 favorable.
B) $15,000 favorable.
C) $15,000 unfavorable.
D) $20,000 favorable.
E) $20,000 unfavorable.

Question

Quizplus · Accepted Answer

The fixed-overhead budget variance is calculated as the difference between the actual fixed overhead incurred and the budgeted fixed overhead. The budgeted fixed overhead is $600,000, and the actual fixed overhead incurred is $620,000. Therefore, the variance is $620,000 - $600,000 = $20,000 unfavorable.

Benson Company, Which Uses a Standard Cost System, Budgeted $600,000