Figure 9-3
Alumni Manufacturing Company has the following information pertaining to a normal monthly activity of 10,000 units:
Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit. Standard factory overhead rates per direct labor hour are:

-Refer to Figure 9-3. What is the variable overhead spending variance for Alumni?
A) $0
B) $4,000 (
C) $86,000 (
D) $10,000 (

Question

Figure 9-3
Alumni Manufacturing Company has the following information pertaining to a normal monthly activity of 10,000 units:
Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit. Standard factory overhead rates per direct labor hour are:
 
-Refer to Figure 9-3. What is the variable overhead spending variance for Alumni?
A) $0 
B) $4,000 (
C) $86,000 (
D) $10,000 (

Quizplus · Accepted Answer

The variable overhead spending variance formula is:

Actual Variable Overhead Cost - (Standard Variable Overhead Rate x Actual Direct Labor Hours)

Plugging in the values given in the question, we get:

$460,000 - ($10 per direct labor hour x 40,000 direct labor hours)

$460,000 - $400,000

= $60,000 unfavorable

However, the question is asking for the variable overhead spending variance, not the total overhead spending variance. Since fixed overhead costs are not affected by the actual hours worked, they will be the same as the budgeted amounts, resulting in a $0 variance. Therefore, the correct answer is B) $4,000 (F), since the $60,000 unfavorable variance for variable overhead costs is partially offset by the $56,000 favorable variance for fixed overhead costs.

Figure 9-3 Alumni Manufacturing Company Has the Following Information Pertaining to a to a Normal