If a company has a budgeted overhead of $100,000 and actual overhead of $120,000

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Question: If a company has a budgeted overhead of $100,000 and actual overhead of $120,000, what is the overhead variance?

Options:

Correct Answer: $20,000 Unfavorable

Solution:

Overhead variance = Actual Overhead - Budgeted Overhead = $120,000 - $100,000 = $20,000 Unfavorable.

If a company has a budgeted overhead of $100,000 and actual overhead of $120,000, what is the overhead variance?

If a company has a budgeted overhead of $100,000 and actual overhead of $120,000, what is the overhead variance?

Step 1: Identify the budgeted overhead amount, which is $100,000.
Step 2: Identify the actual overhead amount, which is $120,000.
Step 3: Use the formula for overhead variance: Overhead Variance = Actual Overhead - Budgeted Overhead.
Step 4: Substitute the values into the formula: Overhead Variance = $120,000 - $100,000.
Step 5: Calculate the result: $120,000 - $100,000 = $20,000.
Step 6: Determine if the variance is favorable or unfavorable. Since actual overhead is greater than budgeted overhead, it is unfavorable.

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