The following information is available from the Terry Company:$\begin{array}{lrr}
\text { Actual total factory overhead cost incurred } & \$ 25,000 \
\text { Actual fixed overhead cost incurred } & \$ 10,400 \
\text { Budgeted fixed overhead expenses } & \$ 11,000 \
\text { Actual direct labor hours (DLH) worked } & 4,400 \
\text { Standard DLHs for this period's production (output) } & 4,000 \
\text { Standard variable overhead rate per DLH } & \$ 3.00 \
\text { Standard fixed overhead rate per DLH } & \$ 2.50
\end{array}$The fixed overhead spending variance for Terry Company for the period, to the nearest whole dollar, is:
A) $600 favorable.
B) $800 unfavorable.
C) $1,000 unfavorable.
D) $1,200 unfavorable.
E) $1,200 favorable.

Question

The following information is available from the Terry Company:$\begin{array}{lrr}
\text { Actual total factory overhead cost incurred } & \$ 25,000 \
\text { Actual fixed overhead cost incurred } & \$ 10,400 \
\text { Budgeted fixed overhead expenses } & \$ 11,000 \
\text { Actual direct labor hours (DLH) worked } & 4,400 \
\text { Standard DLHs for this period's production (output) } & 4,000 \
\text { Standard variable overhead rate per DLH } & \$  3.00 \
\text { Standard fixed overhead rate per DLH } & \$  2.50
\end{array}$The fixed overhead spending variance for Terry Company for the period, to the nearest whole dollar, is:
A) $600 favorable.
B) $800 unfavorable.
C) $1,000 unfavorable.
D) $1,200 unfavorable.
E) $1,200 favorable.

Quizplus · Accepted Answer

The fixed overhead spending variance is calculated as the difference between the actual fixed overhead cost incurred and the budgeted fixed overhead expenses. Here, it is \$10,400 (actual) - \$11,000 (budgeted) = -\$600, which is a $600 favorable variance because the actual spending was less than what was budgeted.

The Following Information Is Available from the Terry Company The Fixed Overhead Spending Variance for Terry Company for the