Pierzynski Company budgets $200,000 in fixed overhead and $6.00 per unit in vari
ID: 2435866 • Letter: P
Question
Pierzynski Company budgets $200,000 in fixed overhead and $6.00 per unit in variable overhead. For June, Pierzynski expected to produce 11,000 units but because of unexpected demand actually produced 13,000 units. The actual overhead cost was $280,000. A flexible budget performance report for May would indicate that:
Answer
Pierzynski was $2,000 under budget (favorable) for overhead for the month
Pierzynski was $12,000 under budget (favorable) for overhead for the month
Pierzynski was $2,000 over budget (unfavorable) for overhead for the month
Pierzynski was $12,000 over budget (unfavorable) for overhead for the month
Explanation / Answer
Pierzynski Company budgets $200,000 in fixed overhead and $6.00 per unit in variable overhead. For June, Pierzynski expected to produce 11,000 units but because of unexpected demand actually produced 13,000 units. The actual overhead cost was $280,000. Flexible budget performance report for May Fixed Cost $200,00 Variable cost 13,000 x 6 = 78,000 Total Overhead cost = $278,000 Actual Overhead = $280,000 Variance = $ 2,000 (U) Answer Pierzynski was $2,000 over budget (unfavorable) for overhead for the month