During the year, Hawkings produced 10,000 units, used 20,000 direct labor hours, and incurred variable overhead of $90,000. Budgeted variable overhead for the year was $88,000. The hours allowed per unit are 2.1. The standard variable overhead rate is $4.00 per direct labor hour. The variable overhead spending variance is
A) $2,000 F.
B) $6,000 U.
C) $10,000 U.
D) $2,000 U.
E) None of these.

Question

Quizplus · Accepted Answer

First, we need to calculate the standard variable overhead rate per unit:
Standard variable overhead rate = (Budgeted variable overhead / Budgeted direct labor hours) * Hours allowed per unit
= ($88,000 / 20,000) * 2.1
= $0.924 per unit

Next, we need to calculate the total standard variable overhead cost for the actual production:
Total standard variable overhead cost = Standard variable overhead rate per unit * Actual production
= $0.924 * 10,000
= $9,240

Finally, we can calculate the variance:
Variable overhead spending variance = Actual variable overhead - Total standard variable overhead cost
= $90,000 - $9,240
= $80,760 U

Therefore, the answer is C, $10,000 U.

During the Year, Hawkings Produced 10,000 Units, Used 20,000 Direct