Question

A company has gathered the following information from a recent production run:

* Standard variable overhead rate - $10
* Actual variable overhead rate - $8
* Standard process hours - 20
* Actual process hours - 25
What is the company’s variable overhead spending variance?

Answer 1

Variable Overhead Spending variance = $50 Favorable

Step-by-step explanation:

Variable Overhead Spending Variance = (Standard Rate - Actual Rate)
`*` Actual Hours

We are provided the following details as follows:

Standard variable overhead rate = $10

Actual variable overhead rate = $8

Actual hours of overhead = 25

Therefore, putting values in above we have,

Variable Overhead Spending variance = ($10 - $8)
`*` 25 = $50

The variance is favorable as standard rate = $10 and actual rate = $8, actual is less than standard.

Variable Overhead Spending variance = $50 Favorable