Question

46. For the current year, Alexandra Company's static budget sales were $300,000. Actual sales for the current year were $275,000. Actual sales last year were $250,000. Expected sales last year were $225,000. What is the static budget variance for sales in the current year?
A) $25,000 Favorable
B) $25,000 Unfavorable
C) $50,000 Favorable
D) $50,000 Unfavorable

47. Jordan Company has the following information available for variable overhead costs. Direct labor hours are the cost driver for variable overhead costs.

Actual variable overhead costs $4,750
Standard variable overhead costs $1.25 per hour
Actual direct labor hours 3,600 hours
Standard direct labor hours per unit 5 hours
Units produced 700

What is the variable overhead spending variance?
A) $250 Unfavorable  
B) $250 Favorable
C) $450 Unfavorable
D) $450 Favorable

Answer 1

Solution 46:

Static Budget Sales for Current year = $300,000

Actual Sales for Current year = $275,000

Static budget variance for sales in the current year = Actual Sales for Current year- Static Budget Sales for Current year

= $275000 - $300000

= - $25,000 (Unfavourable)

Hence option "B" is correct.

Solution 47:

Actual Direct Labor hours = 3600 hours

Actual Rate of Variable Oberhead = Actual variable overhead costs / Actual Direct Labor hours

= $4750 / 3600 = $1.3194444 per hour

Standard Rate of variable overhead = $1.25 per hour

variable overhead spending variance = (SR - AR) * Actual Hours = ($1.25 - $1.3194444)*3600

= - $250 (Unfavourable)

Hence option "A" is correct.