Latimer Textiles Inc.
Latimer Textiles Inc. incurred actual variable overhead expenses of $27 000 in the current year for the production of 8000 units. Variable overhead was applied at a rate of $1.75 per direct labour hour and 2 direct labour hours were budgeted for each unit. The company used 17 400 direct labour hours for production.
-What was Latimer's variable overhead spending variance?
A) $3450 U
B) $3450 F
C) $2450 U
D) $2450 F

Question

Quizplus · Accepted Answer

The variable overhead spending variance is calculated as the difference between the actual variable overhead costs and the budgeted (or standard) costs for the actual hours worked. The budgeted variable overhead cost is $1.75 per direct labour hour times the actual hours worked (17,400 hours), which equals $30,450. The actual cost was $27,000. Therefore, the variance is $30,450 - $27,000 = $3,450 favorable, since the actual costs were less than the budgeted costs.

Latimer Textiles Inc. Latimer Textiles Inc. Incurred Actual Variable Overhead Expenses of $27