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

question 86

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. Which of the two budgets (static or flexible) is preferred for performance evaluations? Why?

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Definitions:

Adaptive Value

The degree to which a trait or behavior enhances an organism's chances of survival and reproduction in its environment.

Evolutionary Theorists

Scholars and scientists who study and develop theories regarding the biological evolution of species, explaining traits and behaviors through natural selection.

Expectancy-Value Model

A psychological theory stating that motivation is determined by an individual's expected outcomes and the value they place on those outcomes.

Study

The act of devoting time and attention to acquiring knowledge on an academic subject, particularly by means of books.