QUESTION 13

1. A company is renting a machine. The rental is a fixed overhead cost. The company applies fixed overhead costs on the basis of machine hours. The predetermined overhead rate is $10 per machine hour. The following information is given:

   Planned production units of product	=	1,000 units
   Standard machine hours per unit of product	=	2 hours
   Budgeted rental cost	=	$20,000
   Actual production units of product	=	900 units
   Actual rental cost incurred	=	$19,500

   Which of the following is not true?

   	A.	The total fixed overhead variance is $500, Favorable.
   	B.	The fixed overhead volume variance is $2,000, Unfavorable.
   	C.	The fixed overhead budget (price) variance is $500, Favorable.
   	D.	The machine was under-utilized.