Universal Pty Ltd Used a Standard Cost System to Prepare

question 19

Multiple Choice

Universal Pty Ltd used a standard cost system to prepare the following budget at normal operating capacity for the month of January 2007.
Actual data for January 2007 were as follows:
Using the two-way analysis of overhead variances, what is the total of the fixed budget variance and the variable overhead spending variance for January 2007?

• A) $3000 favourable
• B) $5000 favourable
• C) $9000 favourable
• D) $3000 unfavourable

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing a particular course of action.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors, leading to more efficient global production patterns.

Specialize

The process of focusing efforts and resources on a narrow area of expertise to increase efficiency and proficiency.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors.