Question

Delson Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended:

Actual units produced: 10,000
Actual variable overhead incurred: $62,000
Actual machine hours worked: 16,000
Standard variable overhead cost per machine hour: $4
If Delson estimates 1.7 hours to manufacture a completed unit, the company's variable-overhead spending variance is:
A. $2,000 favorable.
B. $2,000 unfavorable.
C. $6,000 favorable.
D. $6,000 unfavorable.
E. some other amount not listed above.

Answer 1

The variable-overhead spending variance for Delson Company is the difference between the expected variable overhead and actual variable overhead, which results in a $6,000 favorable variance.

Step-by-step explanation:

To find the variable-overhead spending variance for Delson Company, we need to compare the actual variable overhead incurred to the expected variable overhead based on the standard cost. The company applies overhead on the basis of machine hours, and we have the following data:

• Actual variable overhead incurred: $62,000
• Actual machine hours worked: 16,000 hours
• Standard variable overhead cost per machine hour: $4
• Estimated machine hours for actual production (10,000 units at 1.7 hours per unit): 17,000 hours

The expected variable overhead cost is the standard cost per machine hour multiplied by the estimated machine hours for actual production:

$4 per hour × 17,000 hours = $68,000

The actual variable overhead cost was $62,000, thus the calculation for the spending variance is:

$68,000 (expected) - $62,000 (actual) = $6,000 favorable

Since the actual cost was less than the expected cost, the variance is favorable. Therefore, the correct answer is C. $6,000 favorable.