At 60,000 Machine Hours,Norwall Company's Static Budget for Variable Overhead

question 92

Multiple Choice

At 60,000 machine hours,Norwall Company's static budget for variable overhead costs is $180,000.At 60,000 machine hours,the company's static budget for fixed overhead costs is $300,000.Machine hours are the cost driver of all overhead costs.The static budget is based on 60,000 machine hours.At 60,000 machine hours,the company produces 40,000 units.The following data is available:
$\begin{array} { l } \text {Actual units produced and sold }&42,000 \\ \text {Actual machine hours }&64,000 \\ \text {Actual variable overhead costs }& \$185,600\\ \text {Actual fixed overhead costs }&\$302,400 \\\end{array}$

What is the variable overhead spending variance?

• A) $6,400 Unfavorable
• B) $6,400 Favorable
• C) $1,000 Favorable
• D) $1,000 Unfavorable

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Definitions:

Overhead Assigned

The process of allocating indirect costs to specific cost objects, such as products or services, based on predetermined rates or bases.

Allocation Base

A criterion or standard used to distribute costs among multiple cost objects in a fair and systematic manner.

Plantwide Overhead Rate

A single overhead rate calculated for an entire manufacturing plant, applied uniformly to all cost objects irrespective of the department in which they were produced.

Direct Labor Hours

The total hours worked by employees directly involved in the manufacturing process.