Over and Under, Inc. manufactures weaving looms.
Before the period began, the company prepared the following manufacturing overhead budget for an expected activity level of 15,000 direct labor hours (DL hrs):
Variable Manufacturing Overhead Costs $322,500
Fixed Manufacturing Overhead Costs $205,000
By the end of the period, the company noted that 3,000 fewer direct labor hours were logged than expected. The total actual manufacturing overhead costs incurred during the period was $545,000, of which, $325,000 was fixed.
1. Which of the following statements is correct for the above data?
A. The company’s flexible budget variance for total manufacturing overhead costs during the period equals $64,500.
B. The master budget variance related to fixed manufacturing overhead costs for the period equals $17,500.
C. The flexible budget variance for variable manufacturing overhead costs is favorable because fewer DL hrs were logged during production than expected.
D. The total volume variance can be calculated by multiplying$21.50 by the difference between the expected DL hrs and the actual DL hrs.
E. The volume variance for fixed manufacturing overhead costs is negative.