Answer (D) is correct . The flexible budget overhead variance is the difference between actual overhead costs and the flexible budget amount for the actual output. Standard total fixed costs at any level of production are $27,000. Standard variable overhead is $9 per unit (3 labor hours × $3). Thus, total standard variable overhead is $14,850 for the actual output (1,650 units × $9), and the total flexible budget amount is $41,850 ($27,000 FOH + $14,850 VOH). Accordingly, the favorable flexible budget variance is $1,920 favorable ($41,850 flexible budget amount – $39,930 actual amount).
Answer (A) is incorrect because The flexible budget amount for an output of 1,800 units is $3,270.
Answer (B) is incorrect because The flexible budget amount for an output of 1,800 units is $3,270.
Answer (C) is incorrect because A favorable variance exists. Actual overhead is less than the standard overhead at the actual production level.
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Ardmore’s flexible budget overhead variance for May is
