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Homework answers / question archive / When preparing flexible budget, MAYAR Corporation has the following information available for variable overhead costs
When preparing flexible budget, MAYAR Corporation has the following information available for variable overhead costs. Direct labor hours are the cost driver for variable overhead costs.
Actual variable overhead costs $5,120
Standard variable overhead costs $3.00 per hour
Actual direct labor hours 2,000 hours
Standard direct labor hours per unit 3 hours
Units produced 1,000
What is the variable overhead spending variance?
Select one:
a. $3,880 Favorable
b. $3,880 Unfavorable
c. $1,000 Unfavorable
d. $880 Favorable
Answer is d- $880 Favorable
Variable Overhead Spending Variance = Actual Hours (Actual Rate - Standard Rate)
Actual Rate = 5120/2000 = $2.56
Standard Rate = $3
Actual Hours = 2000
Variable Overhead Spending Variance
= 2000 (2.56 - 3)
= $880 Favorable
