Lenci Corporation Manufactures and Sells a Single Product

question 363

Multiple Choice

Lenci Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 5,100 units, but its actual level of activity was 5,050 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for May:Data used in budgeting: Actual results for May:
The spending variance for manufacturing overhead in May would be closest to:

• A) $160 U
• B) $225 U
• C) $225 F
• D) $160 F

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Definitions:

Variable Manufacturing Overhead

Costs that vary with manufacturing output, including items like indirect materials and utilities required for production processes.

Direct Labor-Hours

The total hours of labor directly involved in producing goods or services, which is often used as a base for allocating overhead costs.

Variable Manufacturing Overhead

Costs that vary with the level of manufacturing activity, including items like indirect materials and utilities.

Fixed Manufacturing Overhead

These are the manufacturing costs that do not vary with the volume of production, including costs like rent, insurance, and salaries for certain employees.