A company budgets total overhead of $10,400 for actual units produced. Actual total overhead is $12,000. The controllable variance is:

A company budgets total overhead of $10,400 for actual units produced. Actual total overhead is $12,000. The controllable variance is:

• A. $1,600 U
• B. $1,600 F
• C. $2,400 U
• D. $0

Answer: (A)

Controllable variance compares what actually happened with what was budgeted for the actual level of activity. It shows how well overhead costs were controlled in the period. Here, the budget for the actual units produced is 10,400, but actual overhead is 12,000. The difference is 12,000 − 10,400 = 1,600, and since actual is higher than budgeted, this is unfavorable. So the controllable variance is 1,600 unfavorable.

Controllable variance compares what actually happened with what was budgeted for the actual level of activity. It shows how well overhead costs were controlled in the period. Here, the budget for the actual units produced is 10,400, but actual overhead is 12,000. The difference is 12,000 − 10,400 = 1,600, and since actual is higher than budgeted, this is unfavorable. So the controllable variance is 1,600 unfavorable.