Problem
Patton Corp. uses a standard cost system to account for the costs of its one products. Budgeted fixed overhead is $172,000, budgeted production is 4,000 per month, and practical capacity is 5,000 units. During November, Patton produced 3,900 units. Fixed overhead incurred totaled $165,420.
Assume Patton calculates its fixed overhead rate based on budgeted production.
a. What is the expected (planned) capacity variance?
b. What is the unexpected (unplanned) capacity variance?