Question

ambo mineral water has produced 5000 units during september 1999. standard labor time allowed is 2 hours per unit at $15/hour. during the month 8000 hours have been worked at the total cost of $160,000. variable factory overhead is applied to product on the basis of direct labor hours. it was estimated that $50,000 variable factory overhead would be incurred. actual variable factory overhead turned to be $48,000. what is the budgeted variable overhead rate and the variable factory overhead spending variance?

Answer 1

Variable factory overhead spending variance is calculated by finding the difference of the actual variable expense and allowed variable expense for actual hours.

The Budgeted Variable Overhead Rate is found be dividing the  Budgeted Variable Overhead by actual production hours.

The Budgeted Variable Overhead Rate is $5.

The Spending Variance is $ 2000 favorable.

Actual Variable FOH                                                                $ 48,000

Variable Budget Allowance (actual hours )  =                $50,000

Spending Variance                                                    $  2000 favorable.

Budgeted Variable Overhead Rate = Variable Budget Allowance/ Actual Hours

 =$50,000/ 2hours × 5000

= $50,000/10,000

=$5

The variances can be more understood by the following.

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