Overhead absorption variance cannot be calculated without actual overhead costs and specified base

Steps:

• Identify the predetermined overhead rate: requires choosing absorption base (labor or machine hours) and dividing budgeted overhead ($25,000) by budgeted base hours.
• Calculate absorbed overhead: multiply rate by actual base hours (35,000 labor or 30,000 machine).
• Determine variance: subtract actual overhead costs from absorbed overhead (positive = over-absorbed; negative = under-absorbed).
• Note missing data: actual overhead costs not provided; base not specified.

Why A is correct:

• Not enough information to confirm any option, as actual overhead and absorption base are required per standard costing formula (variance = absorbed overhead - actual overhead).

Why the others are wrong:

• B: Assumes machine-hour base and absorption on labor hours, yielding ~$4,000 over, but ignores missing actual costs.
• C: Assumes labor-hour base with under-absorption, but actual activity higher suggests over if fixed overhead.
• D: Possible if variable overhead with machine base, but data insufficient.

Final answer: Not enough information.