Cintron Company produces high-quality leather belts. The Boise plant uses a stan

Question

Cintron Company produces high-quality leather belts. The Boise 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?

Standard Price Direct Labor (DL) $ 10 Variable Overhead (per DL hour) $ 7 Fixed Overhead (per DL hour) $ 1.94 Budgeted Production for July 22,146 July Data Number of Belts Produced 33,454 Number of Labor Hours Used 16,939 Standard Labor Hours Allowed 15,304 Actual Variable Overhead Costs    $ 118,762 Actual Fixed Overhead Costs $ 115,873

Explanation / Answer

Answer:- Variable overhead spending variance:-

= (Standard rate - Actual rate)* Actual hours

= ($7 per hour - $7.0111577) * 16939

= 189 Unfavourable

Where:-

Actual rate = Actual variable overhead/Number of labor hours used

=$118762/16939 hours = $7.0111577 per hour

Actual rate has been calculated upto 7 decimal for appropiate calculation of variance.

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