Asked by Danela Maceda on Jul 26, 2024
Verified
Dubberly Corporation's cost formula for its manufacturing overhead is $30,600 per month plus $64 per machine-hour. For the month of March, the company planned for activity of 7,900 machine-hours, but the actual level of activity was 7,880 machine-hours. The actual manufacturing overhead for the month was $558,610.The spending variance for manufacturing overhead in March would be closest to:
A) $22,410 U
B) $22,410 F
C) $23,690 F
D) $23,690 U
Spending Variance
Spending variance is the difference between the budgeted or standard cost of expenses and the actual amount spent, indicating whether costs were higher or lower than expected.
Manufacturing Overhead
All manufacturing costs except direct materials and direct labor, including costs related to operating the factory like rent, utilities, and equipment depreciation.
- Understand and apply the concepts of spending and revenue variances.
Verified Answer
$30,600 + ($64 * 7,900) = $520,600
Next, we can calculate the spending variance by subtracting the actual overhead cost from the expected overhead cost:
$558,610 - $520,600 = $38,010 U
Since this is a unfavorable variance (actual cost is higher than expected cost), we need to choose the answer choice with an "U" (for unfavorable). The closest answer to $38,010 is D) $23,690 U.
Learning Objectives
- Understand and apply the concepts of spending and revenue variances.
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