When preparing flexible budget, MAYAR Corporation has the following information available for variable overhead costs

Accounting Aug 31, 2020

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

Expert Solution

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

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