Zero Company's standard factory overhead rate is $3.75 per direct labor hour (DLH), calculated at 90% capacity = 900 standard DLHs. In December, the company operated at 80% of capacity, or 800 standard DLHs. Budgeted factory overhead at 80% of capacity is $3,150, of which $1,350 is fixed overhead. For December, the actual factory overhead cost was $3,800 for 840 actual DLHs, of which $1,300 was for fixed factory overhead.

What was the fixed factory overhead spending variance (to the nearest whole dollar) for Zero Company in December?
A) $50 favorable.
B) $225 favorable.
C) $425 unfavorable.
D) $560 unfavorable.
E) $610 unfavorable.

Question

Zero Company's standard factory overhead rate is $3.75 per direct labor hour (DLH) , calculated at 90% capacity = 900 standard DLHs. In December, the company operated at 80% of capacity, or 800 standard DLHs. Budgeted factory overhead at 80% of capacity is $3,150, of which $1,350 is fixed overhead. For December, the actual factory overhead cost was $3,800 for 840 actual DLHs, of which $1,300 was for fixed factory overhead.

What was the fixed factory overhead spending variance (to the nearest whole dollar) for Zero Company in December?

What was the fixed factory overhead spending variance (to the nearest whole dollar) for Zero Company in December?
A) $50 favorable.
B) $225 favorable.
C) $425 unfavorable.
D) $560 unfavorable.
E) $610 unfavorable.

Quizplus · Accepted Answer

The fixed factory overhead spending variance is calculated as the difference between the actual fixed overhead costs and the budgeted fixed overhead costs. In this case, the actual fixed overhead was $1,300, and the budgeted fixed overhead at 80% capacity was $1,350. Therefore, the variance is $1,350 - $1,300 = $50 favorable.

Zero Company's Standard Factory Overhead Rate Is $3