Question

Which of the following is used in the computation of the variable-overhead spending variance?

Actual Variable Overhead Cost
Budgeted Variable Overhead Based on Actual Hours Standard Variable Overhead Applied

A. No Yes No

B. No No No

C. Yes No Yes

D. Yes Yes No

E. Yes Yes Yes

Answer 1

The Variable-Overhead Spending Variance is calculated using the Actual Variable Overhead Cost and the Budgeted Variable Overhead Based on Actual Hours. The correct option among the choices provided is Option A.

Step-by-step explanation:

The Variable-Overhead Spending Variance is computed to analyze the difference between the actual variable overhead costs incurred and the budgeted variable overhead costs based on actual hours worked. The correct components used in the computation of this variance can be identified from the options provided:

• Actual Variable Overhead Cost: Represents the actual costs incurred.
• Budgeted Variable Overhead Based on Actual Hours: Represents what the variable overhead costs should have been for the actual hours worked, based on standard rates.
• Standard Variable Overhead Applied: This is used in the computation of the Variable-Overhead Efficiency Variance, not the Spending Variance.

With this understanding, the correct option for the computation of the Variable-Overhead Spending Variance is:

Option A: Actual Variable Overhead Cost: Yes, Budgeted Variable Overhead Based on Actual Hours: Yes, Standard Variable Overhead Applied: No.