Q18QS

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Found in: Page 969

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Mosaic Company applies overhead using machine hours and reports the following information. Compute the total variable overhead cost variance and classify it as favorable or unfavorable.Actual machine hours used 4,700 hoursStandard machine hours (for actual production) 5,000 hoursActual variable overhead rate per hour $4.15Standard variable overhead rate per hour$4.00

The total variable overhead cost variance is \$495 (Favorable).

See the step by step solution

Step 1: Meaning of Favorable Variance

A variance is considered favorable when the actual revenues exceed the budgeted revenues, or the actual costs are less than the budgeted costs. Variances are computed by taking the difference between the actual and budgeted outcomes.