The management of Mouser Manufacturing is analyzing variable overhead variances

Question

The management of Mouser Manufacturing is analyzing variable overhead variances for the fiscal period just ended. The flexible budget called for $352,000 in variable overhead but actual variable overhead was $400,000. In computing the overhead variances, Mouser management discovered that it had used 80,000 pounds of direct material, rather than the budgeted amount of 88,000 pounds. (Pounds of direct material is the single overhead driver of variable overhead). The standard variable overhead rate per pound of direct material is $4.00. What is Mouser's variable overhead spending variance? $16,000 (F) $80,000 (U) $36,000 (U) $40,000 (U)

Explanation / Answer

Answer. $80000 (U) Flexible Budget Actual Variable Overhead Ovrehead              352,000               400,000 DM in Pounts (AQ)                88,000                 80,000 Rate                           4                            5 Variable Overhead Spending Variance = (SR - AR) X AQ Variable Overhead Spending Variance = (4 - 5) X 80000 = $80000 (U)

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