Question

Rand Company had May operations as follows. Units actually produced 76,000 Actual direct labor hours worked 160,000 Actual variable overhead incurred $500,000 Actual fixed overhead incurred 384,000

Based on monthly normal volume of 100,000 units (200,000 direct labor hours), Rand's standard cost system contains the following overhead costs:
Variable $6 per unit
Fixed 4 per unit
The unfavorable variable overhead spending variance was:_________
A. 12,000
B. 20,000
C. 24,000
D. 44,000

Answer 1

B. 20,000

Step-by-step explanation:

Standard Variable overhead rate = $6 per units / 2 direct labour hour

Standard Variable overhead rate = $3 per hour

Variable Overhead Spending Variance = Actual hours worked * (Actual overhead rate - Standard overhead rate)

Variable overhead spending variance = 160,000 * (3.125 -3)

Variable overhead spending variance = 160000*0.875

Variable overhead spending variance = 20,000