Question

During the year, Octagon produced 8,000 units, used 24,000 direct labor hours, and incurred variable overhead of $120,000. Budgeted variable overhead for the year was $90,000. The hours allowed per unit are 2. The standard variable overhead rate is $3.00 per direct labor hour. The variable overhead spending variance is: Group of answer choices $48,000 U. $61,000 U. None of these $27,000 U. $54,000 F.

Answer 1

Answer:

Variable manufacturing overhead rate variance=  $48,000 unfavorable

Explanation:

Giving the following information:

Actual direct labor= 24,000 direct labor hours

Actual variable overhead of $120,000.

The standard variable overhead rate is $3.00 per direct labor hour.

To calculate the variable overhead spending variance, we need to use the following formula:

Variable manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity

Actual rate= 120,000/24,000= $5

Variable manufacturing overhead rate variance= (3 - 5)*24,000

Variable manufacturing overhead rate variance=  $48,000 unfavorable