Question

Abc co. applies overhead to production on the basis of machine hours, reported the following data for the period just ended:

actual units produced: 13,000
actual variable overhead incurred: $68,700
actual machine hours worked: 17,014
standard variable overhead cost per machine hour: $4.30
if abc co. estimates 1.30 hours to manufacture a completed unit, the company's variable-overhead spending variance is?

Answer 1

The variable-overhead spending variance is $4,694.60.

Step-by-step explanation:

The variable-overhead spending variance measures the difference between the actual variable overhead incurred and the standard variable overhead cost based on the actual machine hours worked. To calculate the variance, we need to multiply the standard variable overhead cost per machine hour by the actual machine hours worked and then subtract the actual variable overhead incurred.

In this case, the standard variable overhead cost per machine hour is $4.30 and the actual machine hours worked is 17,014. So, the standard variable overhead cost would be $4.30 * 17,014 = $73,394.60. Subtracting the actual variable overhead incurred of $68,700 from the standard variable overhead cost, the variable-overhead spending variance is $73,394.60 - $68,700 = $4,694.60.