A Manufacturing Company Has a Standard Costing System Based on Machine

question 133

Multiple Choice

A manufacturing company has a standard costing system based on machine hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:
$\begin{array}{|l|r|}\hline \text { Denominator Level of Activity } & 6,100 \mathrm{MHs} \\\hline \text { Overhead Costs at the Denominator Activity Level: } & \\\hline \text { Variable Overhead Cost } & \$ 35,075 \\\hline \text { Fixed Overhead Cost } & \$ 77,775 \\\hline\end{array}$
The following data pertain to operations for the most recent period:
$\begin{array}{|l|r|}\hline \text { Actual Hours } & 6,300 \mathrm{MHs} \\\hline \text { Standard Hours Allowed for the Actual Output } & 5,994 \mathrm{MHs} \\\hline \text { Actual Total Variable Overhead Cost } & \$ 36,540 \\\hline \text { Actual Total Fixed Overhead Cost } & \$ 76,875 \\\hline\end{array}$
-What was the variable overhead spending variance for the period,rounded to the nearest dollar?

• A) $315 favourable.
• B) $315 unfavourable.
• C) $2,075 favourable.
• D) $2,075 unfavourable.

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Definitions:

Mudcracks

Patterns of cracks formed by the drying of mud, indicative of alternating wet and dry conditions, found in both modern and ancient sediments.

Cross Beds

Layers of rock that are inclined relative to the horizontal surface, typically formed by wind or water currents.

Fossils

The preserved remains, impressions, or traces of once-living organisms from a past geological age, embedded and preserved in sedimentary rocks.

Marine Layers

Strata of moist ocean air that is cooled below its dew point temperature and thus forms a layer of clouds at the surface or near the surface of a large body of water.