The following information relating to a company's overhead costs is available.

actual total variable overhead $73,000
actual total fixed overhead $17,000
budgeted variable overhead rate per machine hour $2.50
budgeted total fixed overhead $15,000
budgeted machine hours allowed for actual output 30,000

based on this information, the total variable overhead variance is:

$2,000 favorable.
$6,000 favorable.
$2,000 unfavorable.
$6,000 unfavorable.
$1,000 favorable.

$2,000 favorable

Explanation:

We know,

Total variable overhead variance = Actual variable overhead cost - (Actual machine hour x Standard variable overhead rate)

Given,

Actual total variable overhead = $73,000

Budgeted variable overhead rate per machine hour = $2.50 (It is standard variable overhead rate)

Budgeted machine hours allowed for actual output = 30,000 hour (since there is no actual hour, and the budgeted machine hours used to produce actual output, it will be our actual machine hours)

Hence, putting all the values in the above formula,

Total variable overhead variance = $73,000 - (30,000 hours x $2.50)

Total variable overhead variance = $73,000 - $75,000

Total variable overhead variance = $2,000 (Favorable)

As actual cost is less than budgeted cost, it is favorable situation.

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