The following information is available from the Terry Company:$\begin{array}{lrr}
\text { Actual total factory overhead cost incurred } & \$ 25,000 \
\text { Actual fixed overhead cost incurred } & \$ 10,400 \
\text { Budgeted fixed overhead expenses } & \$ 11,000 \
\text { Actual direct labor hours (DLH) worked } & 4,400 \
\text { Standard DLHs for this period's production (output) } & 4,000 \
\text { Standard variable overhead rate per DLH } & \$ 3.00 \
\text { Standard fixed overhead rate per DLH } & \$ 2.50
\end{array}$What is the total overhead spending variance for Terry Company for the period, to the nearest whole dollar?
A) $800 unfavorable.
B) $1,000 unfavorable.
C) $1,200 unfavorable.
D) $1,400 unfavorable.
E) $2,000 unfavorable.

Question

The following information is available from the Terry Company:$\begin{array}{lrr}
\text { Actual total factory overhead cost incurred } & \$ 25,000 \
\text { Actual fixed overhead cost incurred } & \$ 10,400 \
\text { Budgeted fixed overhead expenses } & \$ 11,000 \
\text { Actual direct labor hours (DLH) worked } & 4,400 \
\text { Standard DLHs for this period's production (output) } & 4,000 \
\text { Standard variable overhead rate per DLH } & \$  3.00 \
\text { Standard fixed overhead rate per DLH } & \$  2.50
\end{array}$What is the total overhead spending variance for Terry Company for the period, to the nearest whole dollar?
A) $800 unfavorable.
B) $1,000 unfavorable.
C) $1,200 unfavorable.
D) $1,400 unfavorable.
E) $2,000 unfavorable.

Quizplus · Accepted Answer

The total overhead spending variance is the difference between the actual total factory overhead cost incurred and the total standard overhead cost that should have been incurred. The total standard overhead cost is calculated by multiplying the standard variable overhead rate by the actual direct labor hours worked, and then adding the standard fixed overhead rate by the actual direct labor hours worked. In this case, the total standard overhead cost is $3.00 x 4,400 + $2.50 x 4,400 = $24,200. The total overhead spending variance is $25,000 - $24,200 = $800 unfavorable.

The Following Information Is Available from the Terry Company What Is the Total Overhead Spending Variance for Terry Company