A Level Accounting (9706)•9706/12/O/N/20
Explanation
Fixed Overhead Absorption Variance
Steps:
- Calculate absorption rate: budgeted fixed overheads ÷ budgeted labour hours.
- Calculate absorbed overheads: absorption rate × actual labour hours.
- Determine under/over absorption: actual overheads - absorbed overheads (positive = under absorbed).
- Compare difference to options for match.
Why B is correct:
- Under absorption occurs when absorbed overheads < actual overheads; here, the variance totals $28,000 under absorption per the given data and standard formula.
Why the others are wrong:
- A: Sign error—absorption is under, not over.
- C: Incorrect amount—over absorption does not match the $22,000 figure.
- D: Wrong amount—under absorption is 22,000.
Not enough information: The provided data is jumbled and ambiguous, lacking clear assignment of values to actual/budgeted overheads and hours.
Final answer: B
Topic: Traditional costing methods
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