New Company has the following information available for variable overhead costs. Direct labor hours are the cost driver for variable overhead costs. Actual variable overhead costs $3,500 Standard variable overhead costs $1.50 per hour Actual direct labor hours 2,500 hours Standard direct labor hours per unit 5 hours Units produced 500 What is the variable overhead spending variance?

Question

Abril Collins

Business

10 October, 21:50

New Company has the following information available for variable overhead costs. Direct labor hours are the cost driver for variable overhead costs. Actual variable overhead costs $3,500 Standard variable overhead costs $1.50 per hour Actual direct labor hours 2,500 hours Standard direct labor hours per unit 5 hours Units produced 500 What is the variable overhead spending variance?

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Kc · Answer 1

Variable overhead spending variance is $250 favorable.

Explanation:

Variable overhead spending variance

SR = Standrad variable overhead cost = $1.50

AR = Actual variable overhead cost = $3,500

AH = Actual Hours work = 2,500 hours

= (SR*AH) - AR

= (1.50*2,500) - 3,500

=3,750 - 3,500

=$250 favorable