Sanford Ltd. produces a product with the following standard cost card: Direct ma

Question

Sanford Ltd. produces a product with the following standard cost card:

Direct materials (20 kg)

$50.00

Direct labour (10 hours)

$84.00

Variable overhead (10 hours)

$18.53

Fixed overhead (10 hours)

$35.00

The fixed overhead rate is based on a standard monthly volume of 15850 units.

The actual results for the month of July 20x5 are as follows:

Direct materials purchased and used (387500 kg)

$620,000

Direct labour (90022 hours)

$1023000

Variable overhead

$324375

Fixed overhead

$580000

Units produced and sold

15179 units

What is Sanford’s variable overhead spending variance for July 20x5? Note: a negative number represents an unfavourable variance and a positive number represents a favourable variance.

Select one:

a. $-255661

b. $157564

c. $-157564

d. $-277420

Direct materials (20 kg)

$50.00

Direct labour (10 hours)

$84.00

Variable overhead (10 hours)

$18.53

Fixed overhead (10 hours)

$35.00

Explanation / Answer

Variable overhead spending variance (Actual oh rate- standard oh rate)*actual hours (324,375            - 90022*1.853) 157564 U answer = $157564 U

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