Formidable Company Collected the Following Information Using the Two Variance Method, What Is the Total Variance

question 90

Multiple Choice

Formidable Company collected the following information: $\begin{array}{ll}\text { Standard costs per unit: }\\\text { Variable overhead } & 4 \text { machine hours } @ \$ 6 \text { per machine hour } \\\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }\\\\\text { Actual output } & 20,000 \text { units } \\\text { Denominator (normal capacity) output } & 21,000 \text { units } \\\text { Actual machine hours } & 79,000 \text { machine hours } \\\text { Actual variable overhead cost } & \$ 540,000 \\\text { Actual fixed overhead cost } & \$ 810,000\\\end{array}$ Using the two variance method, what is the total variance?

• A)$30,000 (U)
• B)$70,000 (U)
• C)$70,000 (F)
• D)$30,000 (F)

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Definitions:

Direct Labour Hours

The total hours worked by employees that can be directly associated with the production of goods or services.

Finished Goods

Manufactured items that are completed and ready for sale but have not yet been sold to customers.

Raw Materials

Primary components or substances used in the production of goods.