Question

Duncanville, Inc., has the following overhead standards:

Variable overhead: 4 hours at $8 per hour
Fixed overhead: 4 hours at $10 per hour
The standards were based on a planned activity of 20,000 machine hours when 5,000 units were scheduled for production. Actual data follow.
Variable overhead incurred: $167,750
Fixed overhead incurred: $210,000
Machine hours worked: 19,800
Actual units produced: 5,100
Duncanville's variable-overhead spending variance is:
A. $550 favorable.
B. $4,550 unfavorable.
C. $4,800 favorable.
D. $9,350 unfavorable.
E. not listed above.

Answer 1

The variable-overhead spending variance for Duncanville, Inc., is calculated by subtracting the standard cost of $158,400 from the actual cost of $167,750, resulting in an unfavorable variance of $9,350.

Step-by-step explanation:

To calculate Duncanville's variable-overhead spending variance, we need to compare the standard cost of variable overhead to the actual amount incurred. The standard cost is based on 4 hours at $8 per hour. For the actual machine hours worked of 19,800, the standard cost would be 19,800 hours × $8 per hour. However, $167,750 was actually incurred. To find the variance, subtract the standard cost from the actual cost.

The standard cost is 19,800 hours × $8 per hour = $158,400. The variable-overhead spending variance is, therefore, the actual cost of $167,750 minus the standard cost of $158,400, which equals $9,350 unfavorable. An unfavorable variance indicates that the costs were higher than expected based on the standards set.