Question
Gerhan Company's flexible budget for the units manufactured in May shows $15,770 of total factory overhead; this output level represents 70% of available capacity. During
Gerhan Company's flexible budget for the units manufactured in May shows $15,770 of total factory overhead; this output level represents 70% of available capacity. During May, the company applied overhead to production at the rate of $3 per direct labor hour (DLH), based on a denominator volume level of 6,120 DLHs, which represents 90% of available capacity. The company used 6,000 DLHs and incurred $18,600 of total factory overhead cost during May, including $7,900 for fixed factory overhead.
What is thevariable factory overhead spending variance(to the nearest whole dollar) in May, assuming Gerhan uses a four-variance breakdown (decomposition) of the total overhead variance?(Round your intermediate calculation to 2 decimal places.)
A. $700 favorable
B. $580 unfavorable
C. $880 unfavorable
D. N/A- this variance is not defined under the four-way breakdown of the total OVH variance.
E. $780 unfavorable
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