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1  HELEEN Manufacturing Company prepares master budget

Accounting Aug 31, 2020

HELEEN Manufacturing Company prepares master budget. The Company had a static budgeted operating income of $9.6 million. Actual operating income was $6.4 million. The flexible budget operating income at the actual level of output is $7,000,000. What is the static-budget variance of operating income?

Select one:
a. $1.6 million Unfavorable
b. $1.6 million Favorable
c. $3.2 million Unfavorable
d. $3.2 million Favorable

When preparing flexible budget, MAYAR Corporation has the following information available for variable overhead costs. Direct labor hours are the cost driver for variable overhead costs.

 

 

Actual variable overhead costs $5,120

 

Standard variable overhead costs $3.00 per hour

 

Actual direct labor hours 2,000 hours

 

Standard direct labor hours per unit 3 hours

 

Units produced 1,000

 

 

What is the variable overhead spending variance?

 

 

Select one:

a. $1,000 Unfavorable

b. $3,880 Favorable

c. $3,880 Unfavorable

d. $880 Favorable

Expert Solution

Static budgeted operating income = $9.6 million

Actual operating income = $6.4 million

flexible budget operating income at the actual level of output = $7,000,000 i.e. $7 million

Static-budget variance of operating income = Actual Operating Income - Budgeted Operating Income

= $6.4 million - $9.6 million

= $3.2 million U

Answer:- Option c i.e. $3.2 million Unfavourable

Answer :-

Option is d. $880 Favorable.

Variable overhead spending variance

SR = Standrad variable overhead cost =$3.00

AR= Actual variable overhead cost =$5,120

AH= Actual Hours work =2,000hours

=(SR*AH)-AR

=(3.00*2,000)-5,120

=6,000 - 5,120

=$880 favorable.

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