The Phelps Company applies overhead costs to products on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: The budgeted direct labor-hours is used as the denominator activity for the month.
-The fixed manufacturing overhead budget variance for March is:
A)$2,000 favorable
B)$500 favorable
C)$2,000 unfavorable
D)$2,500 favorable

Question

The Phelps Company applies overhead costs to products on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March:  The budgeted direct labor-hours is used as the denominator activity for the month.
-The fixed manufacturing overhead budget variance for March is:
A)$2,000 favorable 
B)$500 favorable 
C)$2,000 unfavorable 
D)$2,500 favorable

Quizplus · Accepted Answer

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $52,000 - $50,000 = $2,000 U

The Phelps Company Applies Overhead Costs to Products on the Basis