Simmons Company has the following information available for variable overhead costs.Direct labor hours are the cost driver for variable overhead costs.
$\begin{array}{ll}
\text { Actual variable overhead costs } & \$ 4,700 \
\text { Standard variable overhead costs } & \$ 1.20 \text { per hour } \
\text { Actual direct labor hours } & 3,750 \text { hours } \
\text { Standard direct labor hours per unit } & 5 \text { hours } \
\text { Units produced } & 700
\end{array}$
What is the variable overhead spending variance?
A) $200 Favorable
B) $200 Unfavorable
C) $500 Favorable
D) $500 Unfavorable

Question

Quizplus · Accepted Answer

The variable overhead spending variance is calculated as the difference between the actual variable overhead costs and the expected (or standard) variable overhead costs based on the actual direct labor hours worked. The expected variable overhead costs are calculated as the standard cost per hour ($1.20) multiplied by the actual hours worked (3,750 hours), which equals $4,500 ($1.20 * 3,750). The actual variable overhead costs are $4,700. Therefore, the spending variance is $4,700 (actual) - $4,500 (expected) = $200 unfavorable, because the actual costs were higher than expected.

Simmons Company Has the Following Information Available for Variable Overhead