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2 December, 03:14

Fischer Inc. provides the following information for the year: Actual variable overhead cost per unit of cost-allocation base $186 Budgeted variable overhead cost per unit of cost-allocation base $190 Actual quantity of variable overhead cost-allocation base used 5,000 machine-hours Budgeted quantity of variable overhead cost-allocation base used 4,850 machine-hours Budgeted production during the year 2,000 units Actual production during the year 2,100 units What is the variable overhead spending variance of Fischer Inc. for the year?

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  1. 2 December, 03:24
    0
    variable overhead efficiency variance = $74,400 favorable

    Explanation:

    Giving the following information:

    Actual variable overhead cost per unit of cost-allocation base $186

    Actual quantity of variable overhead cost-allocation base used 5,000 machine-hours

    Budgeted quantity of variable overhead cost-allocation base used 4,850 machine-hours

    Budgeted production during the year 2,000 units

    Actual production during the year 2,100 units

    First, we need to determine the standard amount of hours that would have been used for 2,100 units.

    Standard hours per unit = 5,000/2,000 = 2.5 hours per unit

    Standard hours for actual production = 2.5*2,100 = 5,250

    Now, we can calculate the overhead spending variance:

    variable overhead efficiency variance = (Standard Quantity - Actual Quantity) * Standard Rate

    variable overhead efficiency variance = (5,250 - 4,850) * 186 = $74,400 favorable
  2. 2 December, 03:28
    0
    Variable overhead spending variance = $20,000

    Explanation:

    Variable overhead spending variance is defined as the difference between actual spending on variable overhead and the budgeted amount.

    Variable overhead is the component of manufacturing cost that changes with cvolume of production.

    Actual variable overhead cost per unit is $186 while the budgeted overhead cost per unit is $190.

    Variable overhead spending variance = (Budgeted variable overhead cost per unit - actual variable overhead cost per unit) *

    actual quantity of variable overhead cost-allocation base used for actual output

    Variable overhead spending variance = (190-186) * 5,000 = $20,000

    This is favourable because the actual cost incurred is less than the budgeted cost
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