Question

QUESTION 6 Note the change in numbers from the previous problem. Alpha company makes a single product and uses a standard costing system that applies overhead on the basis of direct labor hours. For the most recent period, the VOH spending variance was $60,000 F, and the VOH Efficiency Variance was $50,000 U. The company budgeted making 4,800 units at 3.5 hours each with $924,000 of VOH. The company actually produced 3,000 units. What was the actual VOH? (Please round to nearest dollar at the end of your calculations)

Answer 1

Ans.	Variable overhead spending variance is $60,000 favorable, it means the standard overhead
	costs are $60,000 more than actual variable overhead cost.
	So, for the calculation of actual VOH we need to compute the standard variable overhead
	cost firstly.
	Standard rate = Standard VOH / (Budgeted units * Standard hours per unit)
	$924,000 / (4,800 * 3.5)
	$924,000 / 16,800
	$55   per hour
	Standard hours = Actual units produced * Standard hours per unit
	3,000 * 3.5
	10,500   hours
	Standard overhead (VOH) = Standard hours * Standard rate
	10,500 * $55
	$577,500
	VOH spending variance = Standard variable overhead - Actual variable overhead (VOH)
	$60,000   = $577,500 - Actual VOH
	Actual VOH = $577,500 - $60,000
	$517,500