Question

The Littlefield Company applies manufacturing overhead costs to products on the basis of direct labor-hours. The standard cost card shows that 12 direct labor-hours are required per unit of product. For August, the company budgeted to work 360,000 direct labor-hours and to incur the following total manufacturing overhead costs:

Total fixed overhead costs	$475,200
Total variable overhead costs	$396,000

During August, the company completed 28,000 units of product, worked 344,000 direct labor-hours, and incurred the following total manufacturing overhead costs:

Total fixed overhead costs	$461,200
Total variable overhead costs	$395,600

The denominator activity in the predetermined overhead rate is 360,000 direct labor-hours. The variable overhead spending variance for August is:

		$17,200 F.
		$17,200 U.
		$26,000 F.
		$26,000 U.

Answer 1

Budgeted variable overhead cost ($ )	396,000.00
Budgeted Direct Labor-hours ( Hours )	360,000.00
Budgeted variable overhead per hour ($ )	1.1
Actual hours worked (hours )	344,000.00
Budgeted variable overhead for actual production ( 344,000 hours x $ 1.1 )	378,400.00
Actual variable overhead ($ )	395,600.00
Variable overhead spending variance = Actual hours worked x (Actual overhead rate - standard overhead rate)
= $ 378,400 - $ 395,600 = $ 17,200 U