Question

Griffen Corporation uses a standard costing system. Information for the month of May is as follows: Actual manufacturing overhead costs ($26,000 is fixed) $80,000 Direct labor: Actual hours worked 12,000 hrs. Standard hours allowed for actual production 10,000 hrs. Average actual labor cost per hour $18.00 The overhead rate is based on a normal volume of 12,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows: Variable overhead $48,000 Fixed overhead 24,000 Total overhead $72,000 ​ What is the fixed overhead spending variance for Griffen?

Answer 1

Answer:

Fixed overhead spending variance                          $

Budgeted fixed overhead cost (12,000 hrs x $2)  24,000

Less: Actual fixed overhead cost                            26,000

Fixed overhead spending variance                         2,000(A)

Explanation:

In this case, we need to calculate the standard fixed overhead application rate, which is the ratio of Budgeted fixed overhead cost to budgeted direct labour hours (normal capacity). Fixed overhead spending variance is the difference between budgeted fixed overhead cost and actual fixed overhead cost. Budgeted fixed overhead cost is budgeted hours multiplied by standard fixed overhead application rate.