Baby Frames, Inc. evaluates manufacturing overhead in its factory by using varia
ID: 2484471 • Letter: B
Question
Baby Frames, Inc. evaluates manufacturing overhead in its factory by using variance analysis. The following information applies to the month of May:
actual budgeted
Number of frames manufactured
19,000
20,000
Variable overhead costs
$4,100
$2 per direct labor hour
Fixed overhead costs
$22,000
$20,000
Direct labor hours
2,100
0.1 hour per frame
What is the fixed overhead spending variance?
a. $1,000 favorable.
b. $1,000 unfavorable.
c. $2,000 favorable.
d. $2,000 unfavorable.
Number of frames manufactured
19,000
20,000
Explanation / Answer
Answer:d. $2,000 unfavorable.
The fixed overhead spending variance is the difference between manufacturing overhead costs and the actual costs incurred thus $2,000 unfavorable ($20,000 budgeted – $22,000 actual).
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