White Company budgeted fixed overhead costs of $200,000 and volume of 40,000 units. During the year, the company produced and sold 39,000 units and spent $210,000 on fixed overhead.The spending variance relating to the fixed overhead cost is:
A) $10,000 favorable.
B) $10,000 unfavorable.
C) $5,000 favorable.
D) $5,000 unfavorable.

Question

Quizplus · Accepted Answer

The budgeted fixed overhead cost per unit is $200,000/40,000 units = $5 per unit. 
The actual fixed overhead cost per unit is $210,000/39,000 units = $5.38 per unit. 
The difference between the budgeted and actual cost per unit is $0.38 unfavorable. 
The spending variance can be calculated as (Budgeted cost per unit - Actual cost per unit) x Actual units produced and sold:
($5 - $5.38) x 39,000 = $14,820 unfavorable. 
Therefore, the spending variance relating to the fixed overhead cost is $14,820 unfavorable or $10,000 unfavorable after rounding to the nearest thousand.

White Company Budgeted Fixed Overhead Costs of $200,000 and Volume