Somalian Corporation uses a standard costing system. Information for the month of May is as follows: Actual manufacturing overhead costs ($26,000 is fixed) $80,000 Direct labor:
Actual hours worked 12,000 hrs.
Standard hours allowed for actual production 10,000 hrs.
Average actual labor cost per hour $18
The factory overhead rate is based on a normal volume of 12,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows:
Variable factory overhead $48,000
Fixed factory overhead 24,000
Total factory overhead $72,000
What is the fixed overhead spending variance for Somalian?
A) $4,000 (U)
B) $8,000 (U)
C) $2,000 (U)
D) $20,000 (U)

Question

Quizplus · Accepted Answer

The fixed overhead spending variance is calculated as the difference between actual fixed overhead costs and budgeted fixed overhead costs. The actual fixed overhead is $26,000, and the budgeted fixed overhead is $24,000. Therefore, the variance is $26,000 - $24,000 = $2,000 (Unfavorable).

Somalian Corporation Uses a Standard Costing System