Answer (A) is correct . Two-variance analysis considers only budget (controllable) and volume variances. When actual and budgeted fixed overhead are equal, the budget (controllable) variance equals the difference between actual variable overhead and standard hours allowed times the variable overhead rate per hour. Thus, the variance is $3,000 favorable [(49,500 × $6) – $294,000]. A favorable variance results when actual is less than standard.
Answer (B) is incorrect because Using actual DLH results in $6,000.
Answer (C) is incorrect because The difference between standard and actual DLH, times the variable overhead rate per hour, is $9,000.
Answer (D) is incorrect because The difference between standard and actual DLH, times the variable overhead rate per hour, is $9,000.
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