The following information is available for Patrick Products for the year: Budgeted sales during the year 5,000 units Actual sales during the year 4,500 units Budgeted machine hours required for the year 10,000 hours Actual machine-hours during the year 9,000 hours Budgeted variable overhead costs $2,500,000 Actual variable overhead costs $2,375,000 What is the variable overhead flexible-budget variance for the year?

$125,000 Adverse variance as the cost actually incurred is higher.

Explanation:

The first step here is to find the Flexed Variable Overhead Cost by using the unitary method:

Budgeted overhead cost for 10,000 budgeted hrs = $2500,000

Budgeted overhead cost for 1 budgeted hrs = $2500,000 / 10000 bud. hrs

Budgeted overhead cost for 1 budgeted hrs = $250 per standard hr

And as we know that

Flexed Variable Overhead Budget = Actual Units * Budgeted overhead cost for standard hr

By simply putting values we have:

Flexed Variable Overhead Budget = 9000 hours * $250 per standard hr

= $2,2500,000

Now we will find the Flexible-budget Variable Overhead Variance by taking the difference of Variable overhead flexible budget and Actual Variable Overhead.

Flexible-budget Variable Overhead Variance = Variable overhead flexible budget - Actual Variable Overhead

By putting the values we have:

Flexible-budget Variable Overhead Variance = $2,2500,000 - $2,375,000

= $125,000 Adverse variance as the cost actually incurred is higher.

variable overhead flexible-budget variance for the year is $125,000

Explanation:

What we need to do is to get the flexed Variable Overhead Cost and we can get this by the method of unitary;

The value of the is budgeted overhead cost for 10,000 budgeted hrs = $2500,000

And also

The value of the budgeted overhead cost for 1 budgeted hrs = $2500,000 ÷ 10000 hrs

The value of the budgeted overhead cost for 1 budgeted hours = $250 per standard hour

To get value of flexed Variable Overhead Budget = Actual Units × Budgeted overhead cost for standard hour

Let's substitute the values

= 9000 × 250

= $2,2500,000

Flexible-budget Variable Overhead Variance is gotten by subtracting the Variable overhead flexible budget and Actual Variable Overhead which we have as;

Flexible-budget Variable Overhead Variance = Variable overhead flexible budget - Actual Variable Overhead

= $2,2500,000 - $2,375,000

= $125,000

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