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Problem asks to fixed production overhead total Variance.sir I solved it the way u taught in the lecture.first expenditure variance and then volume variance but my answer is coming different.could u please solve this problem.Thanks
This is dreadful of BPP and this question could not be asked in this form in the exam.
It is dreadful for two reasons.
Firstly, scenario indicates that the company is using marginal costing because it shows the contribution (and there is nothing in the question to say differently). With marginal costing, the only variance is the expenditure variance which is $500 adverse.
Secondly, even if it had been absorption costing, then although the workings for the answer are shown correctly (the question asks for the total variance – it does not require the analysis into expenditure and volume variances) there is rounding in the answer (which is probably why your answer is different). In the exam we do not round expect where the question specifies to and so the total variance would in fact be:
(18,000 x $3,000/17,500) – $3,500 = $414
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