Question

Atlanta Enterprises incurred $828,000 of fixed overhead during the period. During that same period, the company applied $845,000 of fixed overhead to production and reported an unfavorable budget variance of $41,000. How much was Atlanta's budgeted fixed overhead?

A. $787,000.

B. $804,000.

C. $869,000.

D. $886,000.

E. Not enough information to judge.

Answer 1

Atlanta's budgeted fixed overhead is calculated by adding the unfavorable budget variance to the actual fixed overhead incurred ($828,000 + $41,000), which equals $869,000. The correct answer is (C) $869,000.

Step-by-step explanation:

To determine Atlanta's budgeted fixed overhead, we can use the provided information regarding the actual fixed overhead incurred, the fixed overhead applied to production, and the unfavorable budget variance.

Actual fixed overhead incurred: $828,000

Fixed overhead applied to production: $845,000

Unfavorable budget variance: $41,000

The fixed overhead applied to production can be derived from the budgeted amount and the application rate. An unfavorable budget variance indicates that the actual overhead incurred was higher than what was budgeted. Hence, to find the budgeted fixed overhead, we add the unfavorable variance to what was actually incurred.

Budgeted fixed overhead = Actual fixed overhead incurred + Unfavorable budget variance

Budgeted fixed overhead = $828,000 + $41,000 = $869,000

Therefore, the correct answer is (C) $869,000.