Fischer Inc. provides the following information for the year: Actual variable overhead cost per unit of cost-allocation base $186 Budgeted variable overhead cost per unit of cost-allocation base $190 Actual quantity of variable overhead cost-allocation base used 5,000 machine-hours Budgeted quantity of variable overhead cost-allocation base used 4,850 machine-hours Budgeted production during the year 2,000 units Actual production during the year 2,100 units What is the variable overhead spending variance of Fischer Inc. for the year?

variable overhead efficiency variance= $74,400 favorable

Explanation:

Giving the following information:

Actual variable overhead cost per unit of cost-allocation base $186

Actual quantity of variable overhead cost-allocation base used 5,000 machine-hours

Budgeted quantity of variable overhead cost-allocation base used 4,850 machine-hours

Budgeted production during the year 2,000 units

Actual production during the year 2,100 units

First, we need to determine the standard amount of hours that would have been used for 2,100 units.

Standard hours per unit= 5,000/2,000= 2.5 hours per unit

Standard hours for actual production= 2.5*2,100= 5,250

Now, we can calculate the overhead spending variance:

variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard Rate

variable overhead efficiency variance= (5,250 - 4,850)*186= $74,400 favorable

Variable overhead spending variance= $20,000

Explanation:

Variable overhead spending variance is defined as the difference between actual spending on variable overhead and the budgeted amount.

Variable overhead is the component of manufacturing cost that changes with cvolume of production.

Actual variable overhead cost per unit is $186 while the budgeted overhead cost per unit is $190.

Variable overhead spending variance= (Budgeted variable overhead cost per unit- actual variable overhead cost per unit)*

actual quantity of variable overhead cost-allocation base used for actual output

Variable overhead spending variance=(190-186)*5,000= $20,000

This is favourable because the actual cost incurred is less than the budgeted cost