Mzimba Sofa Company Has Developed the Following Manufacturing Overhead Standards

question 51

Multiple Choice

Mzimba Sofa Company has developed the following manufacturing overhead standards for its sofa production. Manufacturing overhead at Mzimba is applied to production on the basis of standard machine-hours. The above standards were based on an expected annual volume of 20,000 sofas. The actual results last year were as follows:
-What was Mzimba's variable overhead rate variance?

• A) $8,514 favorable
• B) $8,766 unfavorable
• C) $17,280 unfavorable
• D) $54,846 unfavorable

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Definitions:

Retained Earnings

The portion of net income not distributed to shareholders but reserved by the company to reinvest in its core business or to pay debt.

Du Pont Identity

A financial analysis framework that breaks down Return on Equity (ROE) into three component parts—profit margin, asset turnover, and financial leverage—providing insights into a company's operational efficiency.

ROE

Return on Equity, an indicator of financial efficiency determined by dividing the net income by the equity of shareholders.