Reynolds Manufacturing Company has the following information pertaining to a normal monthly 10,000 units. Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.
Standard factory overhead rates per direct labour hour are:
$\begin{array}{ll}
\text { Fixed } & \$ 6.00 \
\text { Variable } & 10.00&\$16.00 \\
\text {Units actually produced in current month}&&\text {9,000 units}\\
\text {Actual factory overhead costs incurred}\
\text {(includes $ \$ 70,000 $ fixed)}&& \$ 156,000 \\
\text {Actual direct labour hours}&&\text {9000 hours}
\end{array}$
-Refer to the figure.What is the variable overhead spending variance for Reynolds?
A)$0
B)$4,000 (F)
C)$10,000 (F)
D)$86,000 (U)

Question

Reynolds Manufacturing Company has the following information pertaining to a normal monthly 10,000 units.  Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.
Standard factory overhead rates per direct labour hour are:
$\begin{array}{ll}
\text { Fixed } & \$ 6.00 \
\text { Variable } & 10.00&\$16.00 \\
\text {Units actually produced in current month}&&\text {9,000 units}\\
\text {Actual factory overhead costs incurred}\
\text {(includes $ \$ 70,000 $ fixed)}&& \$ 156,000 \\
\text {Actual direct labour hours}&&\text {9000 hours}
\end{array}$
-Refer to the figure.What is the variable overhead spending variance for Reynolds?
A)$0
B)$4,000 (F)
C)$10,000 (F)
D)$86,000 (U)

Quizplus · Accepted Answer

The variable overhead spending variance is calculated as the difference between the actual variable overhead costs incurred and the standard variable overhead costs for the actual production volume. The standard variable overhead cost per direct labor hour is $10.00. For 9,000 actual direct labor hours, the standard variable overhead cost would be 9,000 hours * $10.00/hour = $90,000. The actual variable overhead cost can be found by subtracting the fixed overhead from the total actual overhead costs: $156,000 - $70,000 = $86,000. The variable overhead spending variance is $86,000 (actual) - $90,000 (standard) = -$4,000, which is a $4,000 favorable variance.

Reynolds Manufacturing Company Has the Following Information Pertaining to a Normal