Bellingham, Inc. incurred the following during a recent period: Actual Standard
Machine hours 1,350 1,425
Units produced 570 570
Variable overhead costs $2,775 $2,850
The variable overhead spending variance equals:
A)$75 Favourable
B)$150 Favourable
C)$0
D)$75 Unfavourable

Question

Quizplus · Accepted Answer

The formula to calculate the variable overhead spending variance is:

Actual variable overhead - (Actual hours worked x Standard variable overhead rate per hour)

The standard variable overhead rate per hour is calculated by dividing the total standard variable overhead cost by the standard machine hours.

Therefore, the standard variable overhead rate per hour is:

$2,850/1,425 = $2 per machine hour

Now, using the formula above:

$2,775 - (1,350 x $2) = $75 Unfavourable.