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13 March, 22:27

The following information is available for Patrick Products for the year: Budgeted sales during the year 5,000 units Actual sales during the year 4,500 units Budgeted machine hours required for the year 10,000 hours Actual machine-hours during the year 9,000 hours Budgeted variable overhead costs $2,500,000 Actual variable overhead costs $2,375,000 What is the variable overhead flexible-budget variance for the year?

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  1. 13 March, 23:20
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    variable overhead flexible-budget variance for the year is $125,000

    Explanation:

    What we need to do is to get the flexed Variable Overhead Cost and we can get this by the method of unitary;

    The value of the is budgeted overhead cost for 10,000 budgeted hrs = $2500,000

    And also

    The value of the budgeted overhead cost for 1 budgeted hrs = $2500,000 : 10000 hrs

    The value of the budgeted overhead cost for 1 budgeted hours = $250 per standard hour

    To get value of flexed Variable Overhead Budget = Actual Units * Budgeted overhead cost for standard hour

    Let's substitute the values

    = 9000 * 250

    = $2,2500,000

    Flexible-budget Variable Overhead Variance is gotten by subtracting the Variable overhead flexible budget and Actual Variable Overhead which we have as;

    Flexible-budget Variable Overhead Variance = Variable overhead flexible budget - Actual Variable Overhead

    = $2,2500,000 - $2,375,000

    = $125,000
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