Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows one direct labor hour per unit. During 2016, Crawford produced 110,000 units of product, (within the relevant range of activity) incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.
What is Croissant's fixed overhead spending variance for 2016?
A) $60,000 (F)
B) $24,000 (F)
C) $30,000 (U)
D) $36,000 (U)

Question

Quizplus · Accepted Answer

Fixed overhead spending variance = Actual fixed overhead costs incurred - Budgeted fixed overhead costs
= $630,000 - ($6 x 212,000) = $630,000 - $1,272,000 = $(-642,000)

The negative sign indicates an unfavorable variance, meaning that the actual fixed overhead costs incurred were higher than the budgeted fixed overhead costs. Therefore, the fixed overhead spending variance for 2016 is $30,000 (U) - Option C.

Croissant Company's Standard Fixed Overhead Cost Is $6 Per Direct