If the budgeted overhead is $200,000 and the actual overhead is $220,000, what i

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Question: If the budgeted overhead is $200,000 and the actual overhead is $220,000, what is the overhead variance?

Options:

Correct Answer: $20,000 Unfavorable

Solution:

Overhead variance = Actual Overhead - Budgeted Overhead = $220,000 - $200,000 = $20,000 Unfavorable.

If the budgeted overhead is $200,000 and the actual overhead is $220,000, what is the overhead variance?

If the budgeted overhead is $200,000 and the actual overhead is $220,000, what is the overhead variance?

Step 1: Identify the budgeted overhead amount, which is $200,000.
Step 2: Identify the actual overhead amount, which is $220,000.
Step 3: Use the formula for overhead variance: Overhead Variance = Actual Overhead - Budgeted Overhead.
Step 4: Substitute the values into the formula: Overhead Variance = $220,000 - $200,000.
Step 5: Calculate the result: $220,000 - $200,000 = $20,000.
Step 6: Determine if the variance is favorable or unfavorable. Since the actual overhead is greater than the budgeted overhead, it is unfavorable.

Overhead Variance Calculation – This concept involves understanding how to calculate the difference between actual overhead costs and budgeted overhead costs to determine if the variance is favorable or unfavorable.