Answered: ABC's budgeted fixed FOH cost - 100,000…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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ABC's budgeted fixed FOH cost - 100,000 per month plus a variable FOH rate of 4 per direct labor hour. The standard direct labor hours allowed for October production was 36,000. An analysis of the FOH indicates that in October, Ayen had an unfavorable budget (controllable) variance of 2,000 and an unfortunate volume variance of 1000. ABC uses a two way analysis of FOH variance.

What is the actual FOH measured in October?

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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