Synergy Manufacturing Company has a normal monthly activity of 7,500 units.
Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.
Standard factory overhead rates per direct labor hour are:
$\begin{array}{ll}
\text { Fixed } & \$ 5.00 \
\text { Variable } & 12.00 &\$17.00\
\text { Units actually produced in } && 7,000 \text { units } \
\text { current month } \
\text { Actual factory overhead costs } && \$ 140,000\
\text { incurred (includes } \$ 50,000 & \
\text { fixed) } &
\end{array}$
What is the variable overhead spending variance for Synergy?
A)$0
B)$6,000 favorable
C)$6,000 unfavorable
D)$21,000 unfavorable

Question

Synergy Manufacturing Company has a normal monthly activity of 7,500 units.
Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.
Standard factory overhead rates per direct labor hour are:
$\begin{array}{ll}
\text { Fixed } & \$ 5.00 \
\text { Variable } & 12.00 &\$17.00\
\text { Units actually produced in } && 7,000 \text { units } \
\text { current month }  \
\text { Actual factory overhead costs } && \$ 140,000\
\text { incurred (includes } \$ 50,000 & \
\text { fixed) } &
\end{array}$
What is the variable overhead spending variance for Synergy?
A)$0
B)$6,000 favorable
C)$6,000 unfavorable
D)$21,000 unfavorable

Quizplus · Accepted Answer

The variable overhead spending variance is calculated as the difference between the actual variable overhead costs incurred and the expected (or budgeted) variable overhead costs based on the actual production volume. The expected variable overhead costs are calculated by multiplying the standard variable overhead rate per unit by the actual production volume. In this case, the standard variable overhead rate is $12 per direct labor hour, and the actual production volume is 7,000 units. Therefore, the expected variable overhead costs are 7,000 units * $12/unit = $84,000. The actual variable overhead costs can be found by subtracting the fixed overhead costs from the total actual overhead costs, which is $140,000 - $50,000 = $90,000. The variable overhead spending variance is $90,000 (actual) - $84,000 (expected) = $6,000 unfavorable.

Synergy Manufacturing Company Has a Normal Monthly Activity of 7,500