Commodore Company Commodore Company uses a standard cost system for its production process and applies overhead based on direct labor hours.The following information is available for September when Commodore produced 5,000 units:

Standard:

DLH per unit 3.00

Variable overhead per DLH $1.80

Fixed overhead per DLH $3.25

Budgeted variable overhead $27,250

Budgeted fixed overhead $49,500

Actual:

Direct labor hours 16,000

Variable overhead $31,325

Fixed overhead $49,750

Refer to Commodore Company.Using the four-variance approach,what is the variable overhead spending variance?

Question

Commodore Company
Commodore Company uses a standard cost system for its production process and applies overhead based on direct labor hours.The following information is available for September when Commodore produced 5,000 units:

Standard:
DLH per unit	3.00
Variable overhead per DLH	$1.80
Fixed overhead per DLH	$3.25
Budgeted variable overhead	$27,250
Budgeted fixed overhead	$49,500

Actual:
Direct labor hours	16,000
Variable overhead	$31,325
Fixed overhead	$49,750

Refer to Commodore Company.Using the four-variance approach,what is the variable overhead spending variance?

Quizplus · Accepted Answer

The variable overhead spending variance is calculated as the difference between the actual variable overhead costs and the standard variable overhead costs allowed for the actual production. The standard variable overhead cost allowed for the actual production is calculated as the standard variable overhead rate per direct labor hour ($1.80) multiplied by the actual direct labor hours (16,000). Thus, $1.80 * 16,000 = $28,800. The actual variable overhead was $31,325. Therefore, the variable overhead spending variance is $31,325 - $28,800 = $2,525 Unfavorable (U), because the actual costs were higher than the standard costs allowed.

Commodore Company Commodore Company Uses a Standard Cost System for Its Production