Home › ACCA › Management Accounting › Variance Analysis › Actual variable factory overhead is $39,500 and …
Actual variable factory overhead is $39,500 and budgeted variable factory overhead for the units produced is $40,000. What is the controllable variance?
A$500 unfavourable
B$500 favourable
C$1,500 favourable
D$1,500 unfavourable
Answer & Solution
Correct answer: B. $500 favourable
1. The controllable variance compares actual variable overhead with the budget flexed to actual production.
2. Actual variable overhead minus budgeted variable overhead is $39,500 minus $40,000.
3. The result is negative $500.
4. Actual spending came in below the flexed budget, so the variance is favourable.
5. It measures how closely the company held to its budget, which is why it is called controllable.
6. Reversing the subtraction is the classic slip, since it turns a genuine underspend into an unfavourable label.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 8.4 Factory Overhead Variances_
Related questions
Gross profit is $86,830, selling expenses are $18,300 and administrative expenses are $9,1Gross profit at standard is $86,400 and the net variance from standard cost is $430 favourNormal capacity is 10,000 standard hours, 11,000 standard hours apply to the units produceNormal capacity is 10,000 standard hours, 8,000 standard hours apply to the units producedThe variable factory overhead rate is $5 per direct labour hour and 8,000 units are producBudgeted factory overhead at normal capacity is $120,000 and normal capacity is 10,000 dirA direct labour time variance of $1,000 unfavourable sits alongside a rate variance of $2,The actual rate is $9.50 per hour against a standard of $10.00, and 5,100 hours are actual