Underfoot Products Uses Standard Costing - Compute the Fixed Overhead Budget Variance

question 99

Multiple Choice

Underfoot Products uses standard costing. The following information about overhead was generated during May: $\begin{array}{c}\begin{array}{lrr} \text {Standard variable overhead rate } &\\ \text { Standard fixed overhead rate} &\\ \text { Actual variable overhead costs} &\\ \text { Actual fixed overhead costs} &\\ \text { Budgeted fixed overhead costs} &\\ \text { Standard machine hours per unit produced } &\\ \text { Good units prockuced } &\\ \text { Actual machine hours } \end{array}\begin{array}{lll} \text { \$ 2 per machine hours }\\ \text {\$ 1 per machine hours}\\\$ 390,000\\\$ 175,000 \\ \$ 190,000\\10\\18,000\\195,000 \end{array}\end{array}$
- Compute the fixed overhead budget variance.

• A) $5,000 (F)
• B) $5,000 (U)
• C) $10,000 (F)
• D) $15,000 (F)

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Definitions:

Indefinite Useful Life

An intangible asset that is not expected to deplete over a measurable period of time, and hence is not amortized.

Consolidated Income Statement

A financial statement that shows the aggregate operating results of a parent company and its subsidiaries as if the group were a single entity.

FVE Method

FVE Method, or Fair Value Estimation Method, involves estimating the fair value of an asset or liability, taking into account market conditions and other influencing factors.

Equity Method

An accounting technique used when a company invests in another company and has significant influence, typically reflected by owning 20% to 50% of the voting stock, whereby the investment is initially recorded at cost and subsequently adjusted for the investing company's share of the investee's net profits or losses.