Windell Company uses flexible budgets. At normal capacity of 8,000 units, budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. If Windell had actual overhead costs of $250,000 for 9,000 units produced, what is the difference between actual and budgeted costs if a flexible budget is used?

A : $6,000 unfavorable

B : $2,000 favorable

C : $8,000 favorable

D : $2,000 unfavorable

The correct answer is B.

Explanation:

Giving the following information:

Windell Company uses flexible budgets. At a normal capacity of 8,000 units, budgeted manufacturing overhead is $64,000 variable and $180,000 fixed. If Windell had actual overhead costs of $250,000 for 9,000 units produced.

First, we need to calculate the estimated manufactured overhead rate and the allocation moh:

Variable Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 64,000/8,000 = 8

Allocated moh = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated moh = 8*9,000 = 72,000

Over/under allocation = real MOH - allocated MOH

Over/under allocation = 250,000 - (72,000 + 180,000) = 2,000 favorable