Question

Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labour-hours, and its standard costs per unit are as follows:

Direct materials: 5 kg at $8.00 per kg	$	40.00
Direct labour: 3 hours at $15 per hour		45.00
Variable overhead: 3 hours at $9 per hour		27.00
Total standard cost per unit	$	112.00

The company planned to produce and sell 21,000 units in March. However, during March the company actually produced and sold 26,000 units and incurred the following costs:

1. Purchased 160,000 kg of raw materials at a cost of $6.50 per kg. All of this material was used in production.
2. Direct labour: 70,000 hours at a rate of $16 per hour.
3. Total variable manufacturing overhead for the month was $655,200.

7. What is the variable overhead spending variance for March?

Answer 1