If the budgeted overhead is $200,000 and the actual overhead is $180,000, what i

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Question: If the budgeted overhead is $200,000 and the actual overhead is $180,000, what is the overhead variance?

Options:

Correct Answer: $20,000 Favorable

Solution:

Overhead variance = Actual Overhead - Budgeted Overhead = $180,000 - $200,000 = -$20,000, which is favorable.

If the budgeted overhead is $200,000 and the actual overhead is $180,000, what is the overhead variance?

If the budgeted overhead is $200,000 and the actual overhead is $180,000, 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 $180,000.
Step 3: Use the formula for overhead variance: Overhead Variance = Actual Overhead - Budgeted Overhead.
Step 4: Substitute the values into the formula: Overhead Variance = $180,000 - $200,000.
Step 5: Calculate the result: $180,000 - $200,000 = -$20,000.
Step 6: Determine if the variance is favorable or unfavorable. Since the result is negative (-$20,000), it is favorable.

Overhead Variance – The difference between actual overhead costs incurred and budgeted overhead costs, indicating whether the actual costs were higher or lower than expected.