The following standards for variable manufacturing overhead have been established for a company that makes only one product: $\begin{array}{lccc}
\text {Standard hours per unit of output}&\text {5.6 hours}\
\text {Standard variable overhead rate}&\text { \$ 12.00 per hour}\
\end{array}$
The following data pertain to operations for the last month: $\begin{array} { l r }
\text { Actual hours } & 2,600 \text { hours } \
\text { Actual total variable overhead cost } & \$ 31,330 \
\text { Actual output } & 400 \text { units }
\end{array}$ What was the variable overhead spending variance for the month?
A) $130 favourable.
B) $130 unfavourable.
C) $4,338 unfavourable.
D) $4,450 unfavourable.

Question

The following standards for variable manufacturing overhead have been established for a company that makes only one product: $\begin{array}{lccc}
\text {Standard hours per unit of output}&\text {5.6  hours}\
\text {Standard variable overhead rate}&\text { \$ 12.00 per hour}\
\end{array}$
 The following data pertain to operations for the last month: $\begin{array} { l r } 
\text { Actual hours } & 2,600 \text { hours } \
\text { Actual total variable overhead cost } & \$ 31,330 \
\text { Actual output } & 400 \text { units }
\end{array}$ What was the variable overhead spending variance for the month?
A) $130 favourable.
B) $130 unfavourable.
C) $4,338 unfavourable.
D) $4,450 unfavourable.

Quizplus · Accepted Answer

The variable overhead spending variance is calculated as (Actual hours x Standard rate) - Actual cost. Here, (2,600 hours x $12) - $31,330 = $31,200 - $31,330 = $130 unfavourable.

The Following Standards for Variable Manufacturing Overhead Have Been Established