Sommers Fabrication Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs)at $9.70 per MH.The company budgeted its fixed manufacturing overhead cost at $67,000 for the month.During the month,the actual total variable manufacturing overhead was $66,660 and the actual total fixed manufacturing overhead was $70,000.The actual level of activity for the period was 6,600 MHs.What was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month?
A)$2,640 unfavorable
B)$5,640 favorable
C)$2,640 favorable
D)$5,640 unfavorable

Question

Quizplus · Accepted Answer

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $70,000 - $67,000 = $3,000 U
Variable overhead rate variance = (AH F1F1F1S1F1F1F10 AR)- (AH F1F1F1S1F1F1F10 SR)
= $66,660 - (6,600 MHs F1F1F1S1F1F1F10 $9.70 per MH)
= $66,660 - $64,020 = $2,640 U
Total variance = $3,000 U + $2,640 U = $5,640 U

Sommers Fabrication Corporation Has a Standard Cost System in Which