Answer:
$2,000 favorable
Explanation:
We know,
Total variable overhead variance = Actual variable overhead cost - (Actual machine hour x Standard variable overhead rate)
Given,
Actual total variable overhead = $73,000
Budgeted variable overhead rate per machine hour = $2.50 (It is standard variable overhead rate)
Budgeted machine hours allowed for actual output = 30,000 hour (since there is no actual hour, and the budgeted machine hours used to produce actual output, it will be our actual machine hours)
Hence, putting all the values in the above formula,
Total variable overhead variance = $73,000 - (30,000 hours x $2.50)
Total variable overhead variance = $73,000 - $75,000
Total variable overhead variance = $2,000 (Favorable)
As actual cost is less than budgeted cost, it is favorable situation.
