Question

Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labour-hours, and its standard costs per unit are as follows:

Direct materials: 6 kg at $8.00 per kg $ 48.00

Direct labour: 4 hours at $13 per hour 52.00

Variable overhead: 4 hours at $5 per hour 20.00

Total standard cost per unit $ 120.00

The company planned to produce and sell 20,000 units in March. However, during March the company actually produced and sold 25,500 units and incurred the following costs:

Purchased 170,000 kg of raw materials at a cost of $7.20 per kg. All of this material was used in production.

Direct labour: 73,000 hours at a rate of $14 per hour.

Total variable manufacturing overhead for the month was $427,050.

7. What is the variable overhead spending variance for March? (Do not round intermediate calculations. Round the actual overhead rate to two decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)

Answer 1

7
Actual Total variable manufacturing overhead	427050
Less: Variable manufacturing overhead in flexible budget	510000	=25500*20
Variable overhead spending variance for March	82950	F