Bavaria's Budget for Variable Overhead and Fixed Overhead Revealed the Following

question 84

Essay

Bavaria's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead,$348,000;fixed overhead,$600,000.
The company actually worked 43,000 hours,and actual overhead incurred was: variable,$365,500;fixed,$608,000.
Required:
A.Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance.
B.Repeat part "A" assuming the use of a flexible budget.
C.Flexible budgets are preferred in performance evaluations.The use of flexible budgets eliminates volume differences between actual and budgeted activity,allowing the analyst to concentrate on differences between actual and budgeted costs "on the same,level playing field." The result is a clearer picture to study.
C.Which of the two budgets (static or flexible)is preferred for performance evaluations? Why?

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Definitions:

Weather The Storm

A metaphor describing the ability to endure or survive through difficult or challenging times.

Time Inconsistent

When preferences change over time in such a way that what is preferred at one point in time is inconsistent with what is preferred at another time.

Central Bankers

Officials responsible for controlling a country's money supply and monetary policy, often through a central bank.

Policymakers

Individuals or groups responsible for making decisions and guidelines that affect the public policies of a nation.