Question
Gerhan Company's flexible budget for the units manufactured in May shows $15,640 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 $15,640 of total factory overhead; this output level represents 70% of available capacity. During May, the company applied overhead to production at the rate of $3.00 per direct labor hour (DLH), based on a denominator volume level of 6,120 DLHs, which represents 90% of available capacity. The company used 5,000 DLHs and incurred $16,500 of total factory overhead cost during May, including $6,800 for fixed factory overhead.
What is the variable factory overhead spending variance (to the nearest whole dollar) in May, assuming Gerhan uses a four-variance breakdown (decomposition) of the total overhead variance?
Multiple Choice
$300 favorable.
$480 unfavorable.
N/Athis variance is not defined under the four-way breakdown of the total OVH variance.
$180 unfavorable.
$380 unfavorable.
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