Eberley Corporation's cost formula for its manufacturing overhead is $25,700 per month plus $10 per machine-hour. For the month of July, the company planned for activity of 5,900 machine-hours, but the actual level of activity was 5,920 machine-hours. The actual manufacturing overhead for the month was $86,800.
-The spending variance for manufacturing overhead in July would be closest to:

Question

Quizplus · Accepted Answer

Spending Variance = Actual Overhead Costs - Budgeted Overhead Costs

Actual Overhead Costs = $39,100 ($35,000 + $4,100)
Budgeted Overhead Costs = $41,000 ($4 per direct labor hour x 10,000 hours)

Spending Variance = $39,100 - $41,000 = $1,900 U (Unfavorable)

Eberley Corporation's Cost Formula for Its Manufacturing Overhead Is $25,700