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A company operates a standard marginal costing system. Last month its actual fixed overhead expenditure was 10% above budget resulting in a fixed overhead expenditure variance of $36,000. What was the actual expenditure on fixed overheads last month?
A $324,000 B $360,000 C $396,000 D $400,000
Option C is the answer. I have checked the answer of this question but i cant seem to understand it. Can you help me out sir?
In future, you must ask in the Ask the Tutor Forum if you want me to answer. This forum is for students to help each other 🙂
The fixed overhead expenditure variance is the difference between the actual expenditure and the budget expenditure.
Here the difference is $36,000 and so this is 10% of the budget.
Therefore the budget must have been 36,000/10% = $360.000.Therefore the actual expenditure must have been 360,000 + 36,000 = $396,000.
Have you watched my free lectures on variances? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
I’m so sorry I didn’t realise it wasn’t the ask the tutor forum.
With regards to the answer, 36000 is the 10% of the budget and we have to calculate the rest i.e. 90%?Sir, i just realised something. 36000 is the 10% added to the budget and what we actually have to calculate is the rest i.e. 100%. Is that correct?
It is as I replied before. 100% gives you the budget amount. Then add the variance to get the actual amount.
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