Burkett Company uses a standard cost system. Indirect costs were budgeted at $200,000 plus $15 per direct labour hour. The overhead rate is based on 10,000 hours. Actual results were: Standard direct labour hours 9,000
Actual direct labour hours 10,000
Fixed overhead $190,000
Variable overhead $185,000
The variable overhead spending variance was:
A)$10,000 F
B)$50,000 U
C)$35,000 U
D)$15,000 U

Question

Quizplus · Accepted Answer

Variable overhead spending variance = Actual variable overhead - (Standard direct labor hours x variable overhead rate)
Variable overhead rate = (Budgeted indirect costs + Actual indirect costs) / Standard direct labor hours
Variable overhead rate = ($200,000 + $185,000) / 10,000 hours = $38.50 per direct labor hour
Variable overhead spending variance = $185,000 - (9,000 hours x $38.50 per hour) = $35,000 U

Burkett Company Uses a Standard Cost System