Question

Dubberly Corporation's cost formula for its manufacturing overhead is $31,100 per month plus $50 per machine-hour. For the month of March, the company planned for activity of 8,000 machine-hours, but the actual level of activity was 7,930 machine-hours. The actual manufacturing overhead for the month was $454,110. The spending variance for manufacturing overhead in March would be closest to:

Answer 1

Manufacturing overhead spending variance= $26,724 unfavorable

Step-by-step explanation:

Giving the following information:

Dubberly Corporation's cost formula for its manufacturing overhead is $31,100 per month plus $50 per machine-hour.

For March, the company planned for activity of 8,000 machine-hours, but the actual level of activity was 7,930 machine-hours. The actual manufacturing overhead for the month was $454,110.

First, we need to calculate the estimated manufacturing overhead rate.

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= (31,100/8000) + 50= $53.89 per machine hour.

Actual overhead rate= 454,110/7,930= $57.26

Manufacturing overhead spending variance= (standard rate - actual rate)* actual quantity

Manufacturing overhead spending variance= (53.89 - 57.26)*7,930= $26,724 unfavorable