Sopworth and Barking Limited incurs variable production overheads.The company's budget for December 20X9 included 1760 units of sales and production.Variable overheads were recovered at a rate of £2.25 per unit. The actual sales and production in units for the month was 1721, and the actual figure for variable overheads incurred was £4275.
What was the variable production overhead variance for December 20X9?
A)£402.75 (F)
B)£315.00 (F)
C)£315.00 (A)
D)£402.75 (A)

Question

Quizplus · Accepted Answer

The formula for calculating the variable production overhead variance is:

Variable production overhead variance = (Actual overheads incurred - Budgeted overheads) x Actual output

Budgeted variable overheads = Budgeted units of sales and production x Variable overhead recovery rate
= 1760 units x £2.25 per unit
= £3,960

Actual variable overheads incurred = £4,275

Actual output = 1721 units

Variable production overhead variance = (£4,275 - £3,960) x 1721
= £315 x 1721
= £541,215

Since the actual overheads incurred were higher than the budgeted overheads, the variance is adverse or unfavorable. Therefore, the answer is D) £402.75 (A), which is the nearest option to the calculated variance.

Sopworth and Barking Limited Incurs Variable Production Overheads