If an actual variable quantity is 70, the actual and budgeted overhead cost of allocation is $8650 and $3500 respectively, then the variable overhead spending variance will be __________?
Correct answer: D. $360,500
- A. $660,500
- B. $560,500
- C. $460,500
- D. $360,500
Explanation
Variable overhead spending variance is calculated as actual quantity multiplied by the difference between the actual and budgeted allocation rates: 70 × ($8,650 − $3,500) = $360,500. The figures appear to represent rates despite the wording calling them costs of allocation.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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