MacPhail Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During April, the company budgeted for 5,600 units, but its actual level of activity was 5,650 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for April:

Data used in budgeting:

Actual results for April:
-The spending variance for manufacturing overhead in April would be closest to:
A)$875 F
B)$970 U
C)$970 F
D)$875 U

Question

MacPhail Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During April, the company budgeted for 5,600 units, but its actual level of activity was 5,650 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for April:

Data used in budgeting:

Actual results for April:

-The spending variance for manufacturing overhead in April would be closest to:

Data used in budgeting:

Actual results for April: 
-The spending variance for manufacturing overhead in April would be closest to:
A)$875 F 
B)$970 U 
C)$970 F 
D)$875 U

Quizplus · Accepted Answer

Spending variance for manufacturing overhead is calculated as 
Actual Overhead - Budgeted Overhead based on actual level of activity.
Given data: 
Actual Overhead = $161,500 
Budgeted Overhead = $162,470 
(Assuming that the budgeted overhead is for actual level of activity)

Therefore, spending variance = Actual overhead - Budgeted overhead 
= $161,500 - $162,470 
= $970 F

Hence, the correct answer is C.

MacPhail Corporation Manufactures and Sells a Single Product