Shimon Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data. Budgeted output units 15,000 units Budgeted machine-hours 5,000 hours Budgeted variable manufacturing overhead costs for 15,000 units $161,250 Actual output units produced 22,000 units Actual machine-hours used 7,200 hours Actual variable manufacturing overhead costs $242,000 1. What is the flexible-budget variance for variable manufacturing overhead? a. $5,500 favorable b. $5,500 unfavorable c. $4,300 favorable d. none of the above the answer is b but i have no idea where 5500 comes from. anyone keen to help would be greatly appreciated
I've taken cost accounting before, but i forgot how to set this up. I'm gonna check a few books, but it's already 6 days late :(
To find the answer you have to cross multiply the budgeted variable (numerator) divided by the budgeted var cost of units (denominator). You have to find out what the budgeted cost would be if you manufactured 22000 units: 15000 22000 161250 x 3547500000 = 15000 x 236500 = x (budgeted var cost at 22000 units) Production of 22000 units at the budgeted variable cost = 236500 so you take the budgeted var cost at 22000 units (236500) subtract from actual variable cost (242000) the answer is -$5500 or $ 5500 unfavorable 236500-242000 = -5500
