[Track55]

NINJA Question –

Here is the answer for #1310:

“Overhead volume variance is the difference between the budgeted amount of fixed overhead ($20,000) and fixed overhead applied ($19,800, the fixed overhead rate of $1 per unit × 19,800 units of good production). Since the amount of overhead applied is less than the standard total fixed overhead, the variance is unfavorable.”

But if actual OH was $200 less than budgeted, isn’t that a good thing? Shouldn’t it be $200 favorable?

Thanks.

AUD - 74, 99 !!
REG - 74, 92
BEC - 83
FAR - 73, 86

Studying for Ethics exam

California candidate
Business and Industry

[Missy]

It's unfavorable because it's fixed, so there was still $20k in overhead but only $19,800 was applied to cost. So the overhead was underapplied.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Track55]

Oooooohhhhh ….. thanks.

AUD - 74, 99 !!
REG - 74, 92
BEC - 83
FAR - 73, 86

Studying for Ethics exam

California candidate
Business and Industry

[Author]

Replies