Dance Company has a standard variable overhead rate of $4.50 per machine hour, and each unit produced has a standard time allowed of three hours. The company's static budget was based on 46,000 units. Actual results for the year follow: Actual units produced: 42,000
Actual machine hours worked: 120,000
Actual variable overhead incurred: $520,000
Dance's variable-overhead spending variance is:

Question

Quizplus · Accepted Answer

The variable-overhead spending variance is calculated as the difference between the actual variable overhead incurred and the standard variable overhead based on actual machine hours worked. The standard variable overhead for actual machine hours is 120,000 hours * $4.50 = $540,000. The actual variable overhead incurred is $520,000. Therefore, the spending variance is $540,000 - $520,000 = $20,000 favourable.

Dance Company Has a Standard Variable Overhead Rate of $4