A company's flexible budget for the range of 26,000 units to 40,000 units of production showed variable overhead costs of $3.80 per unit and fixed overhead costs of $69,000. The company incurred total overhead costs of $169,400 while operating at a volume of 40,000 units. The total controllable cost variance is:

Question

Nataly Cole

Business

12 January, 22:58

A company's flexible budget for the range of 26,000 units to 40,000 units of production showed variable overhead costs of $3.80 per unit and fixed overhead costs of $69,000. The company incurred total overhead costs of $169,400 while operating at a volume of 40,000 units. The total controllable cost variance is:

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Keith Atkinson · Answer 1

Controllable cost variance = $51,600. favourable

Explanation:

The controllable cot variance is the difference between the the standard controllable cost for the actual output and the actual controllable cost

$

Standard controllable cost for the output achieved

($3.80 * 40,000) = 152,000

Actual controllable cost (169,400-69,000) = 100,400

Controllable cost variance 51,600. Favorable

Note that the fixed cost of $69,000 is not a controllable cost, hence it is deducted from the total overhead cost