A Furniture Manufacturer Has a Standard Costing System Based on Machine

question 123

Multiple Choice

A furniture manufacturer has a standard costing system based on machine hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:
$\begin{array}{|l|r|}\hline \text { Denominator Level of Activity } & 3,300 \mathrm{MHs} \\\hline \text { Overhead Costs at the Denominator Activity Level: } & \\\hline \text { Variable Overhead Cost } & \$ 31,845 \\\hline \text { Fixed Overhead Cost } & \$ 40,425 \\\hline\end{array}$
The following data pertain to operations for the most recent period:
$\begin{array}{|l|r|}\hline \text { Actual Hours } & 3,400 \mathrm{MHs} \\\hline \text { Standard Hours Allowed for the Actual Output } & 3,078 \mathrm{MHs} \\\hline \text { Actual Total Variable Overhead Cost } & \$ 32,980 \\\hline \text { Actual Total Fixed Overhead Cost } & \$ 38,975 \\\hline\end{array}$
-What was the fixed overhead volume variance for the period,rounded to the nearest dollar?

• A) $1,225 favourable.
• B) $2,720 unfavourable.
• C) $2,811 unfavourable.
• D) $3,945 unfavourable.

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Definitions:

Zero-Based Budgeting

A budgeting method where all expenses for each new period are justified, starting from a "zero base," regardless of whether each budget is higher or lower than the previous one.

Budgeted Expenditures

Estimated spending for a given period as planned in a budget, often categorized by departments or projects.

Financial Components

The various elements that make up the financial structure of a company, including assets, liabilities, revenues, and expenses.

Collection Pattern

The typical manner or time frame in which a business receives payments from its customers for goods or services sold.