Question

Moon Manufacturing budgeted fixed overhead costs of $1.50 per unit at an anticipated production level of 1,500 units. In July the company incurred actual fixed overhead costs of $4,800 and actually produced 1,000 units. What is Moon's fixed overhead budget variance for July? O A $3,300 unfavorable OB. $2,550 favorable OC. $2,650 unfavorable D. $3,300 favorable

Answer 1

The fixed overhead budget variance for Moon Manufacturing in July is $2,550 favorable.

Step-by-step explanation:

The fixed overhead budget variance for July can be calculated by subtracting the budgeted fixed overhead costs from the actual fixed overhead costs. In this case, the budgeted fixed overhead costs are $1.50 per unit and the anticipated production level is 1,500 units. So the budgeted fixed overhead costs would be $1.50 * 1,500 = $2,250. The actual fixed overhead costs for July are $4,800. Therefore, the fixed overhead budget variance for July would be $4,800 - $2,250 = $2,550 favorable.

Answer 2

In this case, the budgeted fixed overhead costs are $1.50 per unit multiplied by 1,000 units, which equals $1,500. The actual fixed overhead costs are $4,800. Therefore, the fixed overhead budget variance for July is A.$3,300 unfavorable.

Step-by-step explanation:

Output Level

(in units)

Total Revenue

Total Cost

1

$72

$164

2

$144

$184

3

$216

$214

4

$288

$284

5

$360

$370

Note: To calculate total revenue, multiply the selling price per unit by the output level. To calculate total cost, add fixed cost ($100) to the variable cost for each output level.

Marginal Revenue and Marginal Cost:

Output Level

(in units)

Marginal Revenue

Marginal Cost

1

$72

$700

2

$72

$250

3

$72

$300

4

$72

$350

5

$72

$400

Note: To calculate marginal revenue, subtract the total revenue at the previous output level from the total revenue at the current output level. To calculate marginal cost, subtract the total cost at the previous output level from the total cost at the current output level.

Profit Maximizing Quantity:

The profit maximizing quantity occurs where marginal revenue equals marginal cost. From the table, we can see that this occurs at an output level of 1 unit. At this level, both marginal revenue and marginal cost are equal to $72. Therefore, the profit maximizing quantity is 1 unit.