Abba Company produces sails for boats. The Houston plant uses a standard costing

Question

Abba Company produces sails for boats. The Houston plant uses a standard costing system with the following standards and actuals.

Direct labor is the basis for applying variable and fixed overhead.

What is the Variable Overhead Spending Variance?

Standards     Direct Labor         Standard Rate $ 10     Variable Overhead         Standard Rate $ 6 Fixed Overhead Standard Rate $ 2.71 December Data     Budgeted Production for December 26,194     Number of Sails Produced 38,660     Direct Labor         Actual Usage 16,349 hours Standard Hours Allowed 15,929 hours     Actual Variable Overhead Costs $ 119,542     Actual Fixed Overhead Costs $ 170,586

Explanation / Answer

Variable Overhead Spending Variance = 119542-(15929*6)= 23968 Unfavorable

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