Maria's bakery bakes and sells cakes for special occasions. Each cake requires 2 hours of direct labour time for baking and decorating. Variable overhead is incurred at the rate of £2.50 per labour hour. During the month of May, Maria's bakery produced 500 cakes compared to a budgeted output figure of 460 cakes. Maria's employees worked for 980 hours during May. The total variable overhead cost for May was £2,620. What was Maria's variable overhead total variance for the month of May?
A) £50 Favourable
B) £120 Unfavourable
C) £170 Unfavourable
D) £320 Unfavourable

Question

Quizplus · Accepted Answer

The variable overhead total variance is calculated as the difference between the actual variable overhead cost and the standard variable overhead cost for the actual hours worked. The standard cost is 980 hours * £2.50 = £2,450. The actual cost was £2,620. The variance is £2,620 - £2,450 = £170 Unfavourable.

Maria's Bakery Bakes and Sells Cakes for Special Occasions