Question
Asset Rich Ltd is a capital-intensive firm. Indirect costs make up nearly 70% of the product costs. The company has no direct material costs because
Asset Rich Ltd is a capital-intensive firm. Indirect costs make up nearly 70% of the product costs. The company has no direct material costs because customers provide the direct materials used for each job. To plan and control such costs, the firm employs flexible budgets and standard costs. Overhead rates, based on direct labour hours, are derived from the master budget.
Master Budget Actual Results
Units produced 4,000 3,620
Direct Labour Hours 10,000 11,000
Fixed Overhead $200,000 $205,000
Variable Overhead $320,000 $355,000
Direct Labour $200,000 $180,000
The fixed overhead spending variance was:
a. $5,000 F
b. $5,000 U
c. $24,000 U
d. $19,000 U
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started