Question

Russo Corporation manufactured 16,000 air conditioners during November. The variable overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November: Actual Budgeted Production 16,000 units 18,000 units Machine-hours 7,875 hours 9,000 hours Variable overhead cost per machine-hour: $31.00 $31.50 7. What is the variable overhead spending variance? A) $4,500 unfavorable B) $3,937.50 unfavorable C) $4,500 favorable D) $3,937.50 favorable

Answer 1

D) $3,937.50 favorable

Step-by-step explanation:

We need to use the formula to work out the variance:

`$$Actual hours worked * (standard overhead rate - Actual overhead rate)\\=Variable overhead spending variance`

We post the know values in your table and calculate the variance.

`7,875 * (31.5 - 31) = 3.937,5`

It is favorable because the actual price was lower than standart, the company saved cash, it was a favorable spending.

Remember:

If Standard - Actual = positive --> favorable variance

If Standard - Actual = negative --> unfavorable variance