Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows one direct labor hour per unit. During 2014, Crawford produced 110,000 units of product, (within the relevant range of activity) incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor. What is Croissant's fixed overhead spending variance for 2014?
A) $60,000 (F)
B) $24,000 (F)
C) $30,000 (U)
D) $36,000 (U)

Question

Quizplus · Accepted Answer

Fixed overhead spending variance = Actual fixed overhead - Budgeted fixed overhead
Actual fixed overhead = $630,000
Budgeted fixed overhead = ($6/hour) x 212,000 hours = $1,272,000
Fixed overhead spending variance = $630,000 - $1,272,000 = $642,000 (U)
The unfavorable spending variance indicates that the company spent more than budgeted on fixed overhead costs. However, we need to adjust for the actual level of activity to find the standard fixed overhead spending variance:
Standard fixed overhead cost = ($6/hour) x 212,000 actual hours = $1,272,000
Budgeted fixed overhead cost = ($6/hour) x 110,000 units = $660,000
Standard fixed overhead spending variance = Standard fixed overhead cost - Budgeted fixed overhead cost
= $1,272,000 - $660,000 = $612,000 (U)
To find the fixed overhead spending variance, we subtract the standard fixed overhead spending variance from the actual fixed overhead spending variance:
Fixed overhead spending variance = Actual fixed overhead - Standard fixed overhead cost
= $630,000 - $1,272,000 + $612,000
= $30,000 (U)
Therefore, the answer is C.

Croissant Company's Standard Fixed Overhead Cost Is $6 Per Direct