Danske Company Had Total Underapplied Overhead of $15,000 What Is the Fixed Overhead Spending (Budget)variance for May?
A)

question 93

Multiple Choice

Danske Company had total underapplied overhead of $15,000.Additional information is as follows: $$\begin{array} { | l | r | } \hline \text { Denominator hours for May } & 15,000 \\\hline \text { Actual hours worked during May } & 14,000 \\\hline \text { Standard hours allowed for May } & 12,000 \\\hline \text { Flexible budget fixed overhead cost } & \$ 45,000 \\\hline \text { Actual fixed overhead costs for May } & \$ 48,000 \\\hline\end{array}$$
$\begin{array}{|l|l|}\hline \text { Variable Overheact } & \\\hline \begin{array}{l}\text { Applied based on standard direct labor hours } \\\text { allowed }\end{array} & \$ 42,000 \\\hline \begin{array}{l}\text { Budgeted based on standard direct labor hours }\end{array} & 38,000 \\\hline \text { Fixed Overhead: } & \\\hline \begin{array}{l}\text { Applied based on standard direct labor hours } \\\text { allowed }\end{array} & \$ 30,000 \\\hline \begin{array}{l}\text { Budgeted based on standard direct labor hours }\end{array} & 27,000 \\\hline\end{array}$ What is the fixed overhead spending (budget) variance for May?

• A) $1,000 unfavorable.
• B) $3,000 unfavorable.
• C) $2,000 unfavorable.
• D) $2,000 favorable.

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Definitions:

Estimated Overhead Application Rate

A calculation used to estimate the amount of overhead to allocate to each unit of production or service, based on a pre-determined base.

Raw Materials

The basic, unprocessed inputs used in manufacturing to produce finished goods.

Accounts Payable

Amounts owed to creditors that result from the purchase of goods or services on account—a liability.

Source Documents

Documents that provide evidence of a business's transactions, such as invoices, contracts, or receipts.