The variable overhead spending variance is:
A) $220 F.
B) $220 U.
C) $240 F.
D) $240 U.

Question

Quizplus · Accepted Answer

The variable overhead spending variance measures the difference between the actual variable overhead rate and the budgeted variable overhead rate, multiplied by the actual number of units produced. In this case, the actual rate was ($11,000 ÷ 1,000) = $11 per unit, whereas the budgeted rate was ($10,780 ÷ 980) = $11 per unit. Therefore, the variance = ($11 - $11) x 1,100 = $0. Since the actual spending was $220 higher than the budgeted amount, this implies that the variable overhead efficiency variance was favorable by $220 (meaning that a lower-than-expected number of direct labor hours were used to produce the 1,100 units). Therefore, the overall variance for variable overhead is $220 U.

The Variable Overhead Spending Variance Is