Adobe Company produces electric lawn mowers suitable for home and industrial use.During the year Adobe produced 54,000 mowers, using 163,000 direct labor hours.Adobe's fixed overhead rate is $12 per direct labor hour and the company budgeted 166,500 direct labor hours.Actual fixed overhead for the year was $1,996,000.What is Adobe's fixed overhead spending variance?

Question

Quizplus · Accepted Answer

To calculate the fixed overhead spending variance, we need to use the formula:

Fixed overhead spending variance = Actual fixed overhead - (fixed overhead rate x actual direct labor hours)

Plugging in the numbers we get:

Fixed overhead spending variance = $1,996,000 - ($12 x 163,000) 
Fixed overhead spending variance = $1,996,000 - $1,956,000 
Fixed overhead spending variance = $40,000 favorable

Therefore, the correct answer is B, $2,000 favorable.

Adobe Company Produces Electric Lawn Mowers Suitable for Home and Industrial