Question

Lopez company uses standard costing in its manufacturing plant for auto parts. the standard cost of a particular auto part includes 6 direct labor hours of variable manufacturing overhead at $8 per hour. during june, 4,400 units of this auto part were produced using 28,400 direct labor hours and incurring a total of $245,000 in variable manufacturing overhead cost. calculate the variable overhead spending variance for june. if the variance is favorable, enter a capital f after your number with a space between the number and the f (i.e., 10,000 f). if the variance is unfavorable, enter a capital u after your number with a space between the number and the u (i.e., 10,000 u). do not use decimals in your answer.

Answer 1

Given:
the standard cost of a particular auto part includes 6 direct labor hours of variable manufacturing overhead at $8 per hour
4,400 units of this auto part were produced using 28,400 direct labor hours and incurring a total of $245,000 in variable manufacturing overhead cost.

Variable overhead spending variance = Actual variable overhead - (AH x SR)
VOSV = 245,000 - (28,400 * 8)
VOSV = 245,000 - 227,200
VOSV = 17,800 UNFAVORABLE

The result is Unfavorable because the actual variable overhead exceeded the standard or budgeted variable overhead.