Question
In: Accounting
calculation of the total factory overhead variance.
A firm applied factory overhead of $2 per unit to manufacture each inventory unit. They expected to make 10 units of inventory but made 12 units. The total cost of factory overhead was $21 for the period. The total factory overhead variance was
Select one:
a. $3 Favorable.
b. $1 Favorable.
c. $1 Unfavorable.
d. $3 Unfavorable
Solutions
Expert Solution
Total factory overhead variance = Actual factory overhead cost- standard factory overhead cost
In the above case the firm expected manufacturing of 10 units but they made 12 units.So standard factory overhead of 12 units should be taken for calculation.
Total factory overhead variance = $ 21 - ($ 2 x 12 units )
= $ 3 ( favourable )
When the actual expenses are lower than the standard one's then it is said to be Favourable for the firm. If the standard overhead is lower than the actual overhead arised then it is unfavourable for the firm.
Option -A i.e., $ 3 Favourable .
The total factory overhead variance is $3 Favourable .
Shaik sultan answered 3 years agoRelated Solutions
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