Bavaria's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead, $348,000; fixed overhead, $600,000.
The company actually worked 43,000 hours, and actual overhead incurred was: variable, $365,500; fixed, $608,000.
Required:
A. Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance.
B. Repeat part "A" assuming the use of a flexible budget.
C. Which of the two budgets (static or flexible) is preferred for performance evaluations? Why?

Question

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The Answer of Bavaria's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead, $348,000; fixed overhead, $600,000.
The company actually worked 43,000 hours, and actual overhead incurred was: variable, $365,500; fixed, $608,000.
Required:
A. Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance.
B. Repeat part "A" assuming the use of a flexible budget.
C. Which of the two budgets (static or flexible) is preferred for performance evaluations? Why?

Bavaria's Budget for Variable Overhead and Fixed Overhead Revealed the Following