Rilloto Ltd uses a standard costing system. Overhead costs are allocated based on direct labour hours. The standard variable overhead and fixed overhead rates are $3 and $10 per direct labour hour, respectively. Data relevant for the current period include: $$\begin{array} { | l | l | }
\hline \text { Direct Materials Purchased } & 75,000 \mathrm { k } @ , \$ 11 \text { per kg } \
\hline \text { Direct Materials Used } & 75,000 \mathrm { k } \
\hline \begin{array} { l }
\text { Standard quartity of direct materials for actual } \
\text { production }
\end{array} & 80,000 \mathrm {~kg} \
\hline \text { Direct Materials stardard price } & \$ 13 \text { per kg } \
\hline \text { Direct labour costs incured } & 76,000 @ \$ 14 \text { per hour } \
\hline \begin{array} { l }
\text { Standard Direct Lubour hours for actual } \
\text { production }
\end{array} & 78,000 \text { hours } \
\hline \text { Stardard Direct Labour cost per hour } & \$ 15 \text { per hour } \
\hline \text { Variable overhead costs incured } & \$ 231,210 \
\hline \text { Fixed overhead costs ircured } & \$ 763,000 \
\hline
\end{array}$$ The variable overhead spending variance is:
A) $3,210 F
B) $3,210 U
C) $33,000 F
D) $33,000 U

Question

Rilloto Ltd uses a standard costing system. Overhead costs are allocated based on direct labour hours. The standard variable overhead and fixed overhead rates are $3 and $10 per direct labour hour, respectively. Data relevant for the current period include: $$\begin{array} { | l | l | } 
\hline \text { Direct Materials Purchased } & 75,000 \mathrm { k } @ , \$ 11 \text { per kg } \
\hline \text { Direct Materials Used } & 75,000 \mathrm { k } \
\hline \begin{array} { l } 
\text { Standard quartity of direct materials for actual } \
\text { production }
\end{array} & 80,000 \mathrm {~kg} \
\hline \text { Direct Materials stardard price } & \$ 13 \text { per kg } \
\hline \text { Direct labour costs incured } & 76,000 @ \$ 14 \text { per hour } \
\hline \begin{array} { l } 
\text { Standard Direct Lubour hours for actual } \
\text { production }
\end{array} & 78,000 \text { hours } \
\hline \text { Stardard Direct Labour cost per hour } & \$ 15 \text { per hour } \
\hline \text { Variable overhead costs incured } & \$ 231,210 \
\hline \text { Fixed overhead costs ircured } & \$ 763,000 \
\hline
\end{array}$$ The variable overhead spending variance is:
A) $3,210 F
B) $3,210 U
C) $33,000 F
D) $33,000 U

Quizplus · Accepted Answer

The variable overhead spending variance is calculated as the difference between the actual variable overhead costs incurred and the standard variable overhead costs allowed for the actual production. The standard variable overhead cost allowed for the actual production is calculated as the standard variable overhead rate ($3 per direct labour hour) multiplied by the actual direct labour hours worked (76,000 hours), which equals $228,000. The actual variable overhead costs incurred are $231,210. Therefore, the variable overhead spending variance is $231,210 - $228,000 = $3,210 unfavorable (U), because the actual costs were higher than the standard costs allowed.

Rilloto Ltd Uses a Standard Costing System The Variable Overhead Spending Variance Is: A) $3,210 F B)

Rilloto Ltd Uses a Standard Costing System The Variable Overhead Spending Variance Is:
A) $3,210 F
B)