Question

# The following data pertains to the month of October for ElmCo. when production was budgeted to...

The following data pertains to the month of October for ElmCo. when production was budgeted to be 5,000 units of P90. P90 has standard costs per unit of: 3 lbs. of Direct Materials at a cost of \$7.00 per lb.; 0.20 hours of Direct Labor at \$18.00 per hour; and Variable Overhead assigned on the basis of 0.05 machine hours at a rate of \$50 per machine hour. In October the production of P90 totaled 4,600 units, using 324 machine hours costing a total of \$17,066. Determine the variable overhead spending variance. (Negative numbers indicate a favorable variance.)

 Ans. Variable overhead spending variance = Actual variable overhead cost - (Standard hours * Standard rate) \$17,066 - (230 * \$50) \$17,066 - \$11,500 \$5,566 Unfavorable *If the standard cost, rate and hours are higher than the actual it means the variance is favorable. *If the standard cost, rate and hours are lower than the actual it means the variance is unfavorable. *Standard hours = Actual output * standard hours per unit of output 4,600 units * 0.05 machine hours per unit 230 machine hours

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