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16 October, 01:52

A company's flexible budget for 53,000 units of production showed variable overhead costs of $92,750 and fixed overhead costs of $69,000. The company incurred overhead costs of $146,500 while operating at a volume of 45,000 units. The total controllable cost variance is:

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  1. 16 October, 04:50
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    Total controllable cost Variance $1,250 Favourable

    Explanation:

    The uncontrollable cost variance is the difference between the

    actual overhead cost and the standard cost for the actual volume produced.

    Step 1

    standard variable overhead per unit

    = Budget amount/activity level

    = $92,750/53,000

    = $1.75

    Step 2

    Standard cost for the actual level of 45,000 units

    =$1.75 * 45,000

    =$78,750

    Step 3

    Actual variable overhead (controllable) incurred

    = $146,500 - $69,000

    = $ 77,500.00

    step 4

    Controllable overhead variance:

    Standard cost = $78,750

    Actual cost $77,500

    Variance 1,250 Favourable
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