Hyphen Corporation uses a standard costing system. Information for the month of June is as follows:
The factory overhead rate is based on a normal volume of 12,000 direct labour hours. Standard cost data at 12,000 direct labour hours were as follows:
$\begin{array}{lr}\text { Actual manufacturing overhead costs }(\$ 26,000 \text { is fixed) }&\$80,000\
\text { Direct labour: }\
\text { Actual hours worked } & 12,000 \text { hours } \
\text { Standard hours allowed for actual production } & 10,000 \text { hours } \
\text { Average actual labour cost per hour } & \$ 18
\end{array}$ $\begin{array}{lr}
\text { Variable factory overhead } & \$ 48,000 \
\text { Fixed factory overhead } & 24,000 \
\text { Total factory overhead } & \$ 72,000
\end{array}$
-Refer to the Figure.What is the fixed overhead spending variance for Hyphen?
A)$2,000 (U)
B)$4,000 (U)
C)$8,000 (U)
D)$20,000 (U)

Question

Hyphen Corporation uses a standard costing system. Information for the month of June is as follows:
The factory overhead rate is based on a normal volume of 12,000 direct labour hours. Standard cost data at 12,000 direct labour hours were as follows:
 $\begin{array}{lr}\text { Actual manufacturing overhead costs }(\$ 26,000 \text { is fixed) }&\$80,000\
\text { Direct labour: }\
\text { Actual hours worked } & 12,000 \text { hours } \
\text { Standard hours allowed for actual production } & 10,000 \text { hours } \
\text { Average actual labour cost per hour } & \$ 18
\end{array}$ $\begin{array}{lr}
\text { Variable factory overhead } & \$ 48,000 \
\text { Fixed factory overhead } & 24,000 \
\text { Total factory overhead } & \$ 72,000
\end{array}$
-Refer to the Figure.What is the fixed overhead spending variance for Hyphen?
A)$2,000 (U)
B)$4,000 (U)
C)$8,000 (U)
D)$20,000 (U)

Quizplus · Accepted Answer

The fixed overhead spending variance is calculated as the difference between the actual fixed overhead costs and the budgeted (or standard) fixed overhead costs. The actual fixed overhead costs are given as $26,000, and the budgeted fixed overhead costs are $24,000. Therefore, the fixed overhead spending variance is $26,000 - $24,000 = $2,000 unfavorable (U), because the actual costs exceeded the budgeted costs.

Hyphen Corporation Uses a Standard Costing System -Refer to the Figure