Abbott has a standard variable overhead rate of $5.20 per machine hour, and each

Question

Abbott has a standard variable overhead rate of $5.20 per machine hour, and each unit produced has a standard time allowed of 2.60 hours. The company's static budget was based on 46,000 units. Actual results for the year follow.

Actual units produced: 44,000
Actual machine hours worked: 110,000
Actual variable overhead incurred: $550,000

rev: 10_29_2012

Abbott's variable-overhead spending variance is:

$22,000 favorable.
$22,000 unfavorable.
$22,880 favorable.
$22,880 unfavorable.
None of these.

Abbott's variable-overhead efficiency variance is:

$22,000 favorable.

$-22,000 unfavorable.

$22,880 favorable.

$-22,880 unfavorable.

None of the above.

Explanation / Answer

Variable overhead spending variance = (5.2*110000-550000) = 22000 Favorable

So answer is a) $22000 Favorable

Variable overhead efficiency variance = (44000*2.6-110000)*5.2 = 22880 Favorable

So answer is c) $22880 favorable

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