Dubberly Corporation's cost formula for its manufacturing overhead is $31,000 per month plus $66 per machine-hour. For the month of March, the company planned for activity of 7,980 machine-hours, but the actual level of activity was 7,920 machine-hours. The actual manufacturing overhead for the month was $580,570.The spending variance for manufacturing overhead in March would be closest to:
A) $22,890 U
B) $22,890 F
C) $26,850 F
D) $26,850 U

Question

Quizplus · Accepted Answer

The spending variance for manufacturing overhead is calculated as the difference between the actual manufacturing overhead costs and the budgeted (or standard) costs based on the actual activity level. The budgeted manufacturing overhead costs can be calculated using the cost formula given: $31,000 per month plus $66 per machine-hour. For the actual activity of 7,920 machine-hours, the budgeted costs would be $31,000 + ($66 * 7,920) = $31,000 + $522,720 = $553,720. The actual manufacturing overhead was $580,570. Therefore, the spending variance is $580,570 - $553,720 = $26,850 unfavorable (U), because the actual costs were higher than the budgeted costs.

Dubberly Corporation's Cost Formula for Its Manufacturing Overhead Is $31,000