Geovanni Inc. uses standard costs to prepare its flexible budget. Standard and actual costs data for manufacturing overhead for producing 5,000 units of product are as follows:Standard and actual costs data for manufacturing overheadCostsRate Allocation base per unitVariable overhead$8 per direct labor hour 2 hours Fixed overhead (based on 12,000 hours at 100% capacity)$3 per direct labor hour 2 hours Actual total overhead costs are as follows:Actual Total Overhead CostsCostsAmountsTotal variable overhead costs$58,000Total fixed overhead costs $20,000Compute the fixed overhead cost variance.Group of answer choices-$7,000 favorable$10,000 unfavorable-$10,000 favorable$18,000 unfavorable

The objective of the question is to calculate the fixed overhead cost variance for Geovanni Inc.…

Answered: Geovanni Inc. uses standard costs to…

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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Question

Geovanni Inc. uses standard costs to prepare its flexible budget. Standard and actual costs data for manufacturing overhead for producing 5,000 units of product are as follows:

Standard and actual costs data for manufacturing overhead

Costs	Rate	Allocation base per unit
Variable overhead	$8 per direct labor hour	2 hours
Fixed overhead (based on 12,000 hours at 100% capacity)	$3 per direct labor hour	2 hours

Actual total overhead costs are as follows:

Actual Total Overhead Costs

Costs	Amounts
Total variable overhead costs	$58,000
Total fixed overhead costs	$20,000

Compute the fixed overhead cost variance.

Group of answer choices

-$7,000 favorable

$10,000 unfavorable

-$10,000 favorable

$18,000 unfavorable

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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