Figure 17-6 $\begin{array}{lr}
\text { Budgeted fixed overhead for the year } & £ 300,000 \
\text { Budgeted direct labour hours for the year } & 30,000 \
\text { Actual fixed overhead for August } & £ 24,000 \
\text { Actual variable overhead for August } & £ 10,000 \
\text { Direct labour hours worked in August } & 2,600 \
\text { Standard variable overhead cost per direct labour hour } & £ 4 \
\text { Standard direct labour hours allowed for August production } & 2,750
\end{array}$
-Refer to Figure 17-6. The fixed overhead spending variance would be
A)£2,500 unfavourable.
B)£2,500 favourable.
C)£1,000 unfavourable.
D)£1,000 favourable.

Question

Quizplus · Accepted Answer

The fixed overhead spending variance is calculated as the difference between the actual fixed overhead and the budgeted fixed overhead for the period. The budgeted fixed overhead for August can be calculated by dividing the annual budgeted fixed overhead (£300,000) by 12 months, which equals £25,000 per month. The actual fixed overhead for August is £24,000. Therefore, the fixed overhead spending variance is £25,000 (budgeted) - £24,000 (actual) = £1,000 favourable, because the actual spending was less than the budgeted amount.

Figure 17-6 -Refer to Figure 17-6