Question

Rowe Corporation reported the following variances for the period just ended:

Variable-overhead spending variance: $50,000U
Variable-overhead efficiency variance: $28,000U
Fixed-overhead budget variance: $70,000U
Fixed-overhead volume variance: $30,000U
If Rowe desires to analyze variances that arose primarily from managers' expenditures in excess of anticipated amounts, the company should focus on variances that total:
A. $50,000U.
B. $70,000U.
C. $120,000U.
D. $178,000U.
E. some other amount.

Answer 1

To analyze variances that arose primarily from managers' expenditures in excess of anticipated amounts, Rowe Corporation should focus on the fixed-overhead budget variance and the fixed-overhead volume variance.

Step-by-step explanation:

To analyze variances that arose primarily from managers' expenditures in excess of anticipated amounts, Rowe Corporation should focus on the fixed-overhead budget variance and the fixed-overhead volume variance. The fixed-overhead budget variance reflects the difference between the actual fixed overhead costs incurred and the budgeted fixed overhead costs. In this case, the fixed-overhead budget variance is $70,000U, indicating that the actual fixed overhead costs exceeded the budgeted amount by $70,000. The fixed-overhead volume variance, on the other hand, measures the difference between the fixed overhead costs that should have been incurred based on the actual level of production and the budgeted fixed overhead costs. In this case, the fixed-overhead volume variance is $30,000U, indicating that the actual level of production was lower than anticipated, resulting in lower fixed overhead costs.