Dubberly Corporation's cost formula for its manufacturing overhead is $30,600 per month plus $64 per machine-hour. For the month of March, the company planned for activity of 7,900 machine-hours, but the actual level of activity was 7,880 machine-hours. The actual manufacturing overhead for the month was $558,610.The spending variance for manufacturing overhead in March would be closest to:
A) $22,410 U
B) $22,410 F
C) $23,690 F
D) $23,690 U

Question

Quizplus · Accepted Answer

First, we need to calculate the total overhead cost that should have been incurred based on the planned activity level:
$30,600 + ($64 * 7,900) = $520,600

Next, we can calculate the spending variance by subtracting the actual overhead cost from the expected overhead cost:
$558,610 - $520,600 = $38,010 U

Since this is a unfavorable variance (actual cost is higher than expected cost), we need to choose the answer choice with an "U" (for unfavorable). The closest answer to $38,010 is D) $23,690 U.

Dubberly Corporation's Cost Formula for Its Manufacturing Overhead Is $30,600