Question

Neocomfort Corporation manufactured 3,000 chairs during June. The following variable overhead data relates to June:

Budgeted variable overhead cost per unit $ 12.00
Actual variable manufacturing overhead cost $49,900
Flexible-budget amount for variable manufacturing overhead $47,800
Variable manufacturing overhead efficiency variance $720 unfavorable

18) What is the variable overhead flexible-budget variance?
A) $2,100 favorable
B) $1,380 favorable
C) $2,100 unfavorable
D) $1,380 unfavorable

19) What is the variable overhead spending variance?
A) $1,380 favorable
B) $2,820 favorable
C) $2,820 unfavorable
D) $1,380 unfavorable

Answer 1

The variable overhead flexible-budget variance is $2,100 unfavorable and the variable overhead spending variance is $1,380 unfavorable. Correct option is D.

Step-by-step explanation:

The variable overhead flexible-budget variance can be calculated by subtracting the flexible-budget amount from the actual variable manufacturing overhead cost. In this case, the flexible-budget amount is $47,800 and the actual cost is $49,900. So the flexible-budget variance is $49,900 - $47,800 = $2,100 unfavorable. Therefore, the answer to the first question is C) $2,100 unfavorable.

The variable overhead spending variance can be calculated by subtracting the flexible-budget amount from the actual cost of variable manufacturing overhead and then multiplying by the actual variable manufacturing overhead cost per unit. In this case, the actual cost is $49,900 and the flexible-budget amount is $47,800, so the difference is $49,900 - $47,800 = $2,100. Since the variable manufacturing overhead efficiency variance is given as $720 unfavorable, we can subtract this from the difference to get the variable overhead spending variance. Therefore, the variable overhead spending variance is $2,100 - $720 = $1,380 unfavorable. So the answer to the second question is D) $1,380 unfavorable.