The total overhead variance in 2021 for Bluecap Company was: Multiple Choice
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:O
O
O
O
$37,840 unfavorable.
$14,000 unfavorable.
$15,040 favorable.
$17,280 favorable.
$37,840 favorable.
Transcribed Image Text:Bluecap Company uses a standard cost system and flexible budgets for control purposes. The following budgeted information pertains to
2021
Denominator volume-number of units
Denominator volume-percent of capacity
Denominator volume-standard direct labor hours (DLHS)
Budgeted variable factory overhead cost at denominator volume
Total standard factory overhead rate per DLH
8,000
80%
Multiple Choice
24,000
$ 103,200
$ 15.10
During 2021, Bluecap worked 28,000 DLHs and manufactured 9,600 units. The actual factory overhead cost for the year was $14,000
greater than the flexible budget amount for the units produced, of which $6,000 was due to fixed factory overhead. In preparing a budget
for 2022 Bluecap decided to raise the level of operation to 90% of capacity (a level it considers to be "practical capacity), to manufacture
9,000 units at a budgeted total of 27,000 DLHS.
The total overhead variance in 2021 for Bluecap Company was:
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