Question

Fletcher has budgeted fixed overhead of $135,000 based on budgeted production of 9,000 units. During July, 9,400 units were produced and $142,800 was spent on fixed overhead.What is the fixed overhead spending variance?a. $1,800 unfavorableb. $7,800 unfavorablec. $1,800 favorabled. $7,800 favorable

Answer 1

The fixed overhead spending variance of Fletcher during July is $7,800 unfavorable (B).

From the case, we know that:

Budgeted fixed overhead = $135,000

Budgeted production unit = 9,000 units

Actual fixed overhead = $142,800

Actual production unit = 9,400 units

Fixed overhead spending variance calculates the difference between the actual fixed overhead and the budgeted fixed overhead. Fixed overhead spending variance can be formulated as:

Fixed overhead spending variance = actual fixed overhead - budgeted fixed overhead

Fixed overhead spending variance = $142,800 - $135,000

Fixed overhead spending variance = $7,800 unfavorable

Note that the fixed overhead spending variance is unfavorable since the actual fixed overhead is above the budgeted fixed overhead.

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