Question

# 46. For the current year, Alexandra Company's static budget sales were \$300,000. Actual sales for the...

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.

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

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.

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