Question

Warp Manufacturing Corporation uses a standard cost system to collect costs related to the production of its ski lift chairs. Warp uses machine hours as an overhead base. The variable overhead standards for each chair are 1.2 machine hours at a standard cost of $18 per hour. During the month of September, Warp incurred 34,000 machine hours in the production of 32,000 ski lift chairs. The total variable overhead cost was $649,400. What is Warp's variable overhead spending variance for the month of September?
a. $37,400 unfavorable
b. $41,800 favorable
c. $79,200 Favorable
d. $84,040 favorable

Answer 1

Answer:

A. $37,400 unfavorable

Explanation:

With regards to the above, variable overhead spending variance is computed as

= (Actual hours × Actual rate) - (Actual hours × standard rate)

= $649,400 - ( 34,000 × $18)

= $649,400 - $612,000

= $37,400 unfavorable

Therefore, Warp's variable overhead spending variance for the month of September is $37,400 unfavorable