Question: Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted information pertains to 2016:
Denominator volume-number of units 8,000
Denominator volume-percent of capacity 80%
Denominator volume-standard direct labor hours 24,000
Budgeted variable factory overhead cost at denominator volume $103,200
Total standard factory overhead rate per direct labor hour $15.10
During 2016, Bluecap worked 28,000 direct labor hours and manufactured 9,600 units. The actual factory overhead cost for the year was $14,000 greater than the flexible budget amount for the units produced, of which $6,000 was due to fixed factory overhead. In preparing a budget for 2017 Bluecap decided to raise the level of operation to 90% of capacity (a level it considers to be "practical capacity"), to manufacture 9,000 units at a budgeted total of 27,000 direct labor hours.
Required: Compute the total overhead variance in 2016 for Bluecap Co.?
a. $15,040 favorable
b. $14,000 unfavorable
c. $37,840 favorable
d. $37,840 unfavorable
e. $17,280 favorable
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