Fact Pattern: Franklin Glass Works' production budget for the year ended November 30 was based on 200,000 units. Each unit requires 2 standard hours of labor for completion. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was estimated to be $3.00 per unit. Both fixed and variable overhead are assigned to the product on the basis of direct labor hours. The actual data for the year ended November 30 are presented as follows.
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Actual production in units
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198,000
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Actual direct labor hours
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440,000
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Actual variable overhead
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$352,000
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Actual fixed overhead
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$575,000
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Franklin's variable overhead spending variance for the year is |
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Answer (D) is correct.
Based on the 440,000 hours actually worked and the $.75 per hour variable overhead rate, the total standard cost for variable overhead is $330,000. The actual variable overhead totaled $352,000. The $22,000 variable overhead spending variance is unfavorable because the actual cost was higher than the standard.
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Tayba Al-Mehdar
Controller
Khobar
Saudi Arabia
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