King Company estimated that it would operate its manufacturing facilities at 800,000 direct labour hours for...

 

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King Company estimated that it would operate its manufacturing facilities at 800,000 direct labour hours for the year, which served as the denominator activity in the predetermined overhead rate. The total budgeted manufacturing overhead for the year was $2,000,000, of which $1,600,000 was variable and $400,000 was fixed. The standard variable overhead rate was $2 per direct labour hour. The standard direct labour time was 3 direct labour hours per unit. The actual results for the year are presented below: Actual Finished Units Actual Direct Labour Hours Actual Variable Overhead Actual Fixed Overhead 250,000 764,000 $1,610,000 $ 392,000 A. What was the variable overhead spending variance for the year? B. What was the variable overhead efficiency variance for the year? King Company estimated that it would operate its manufacturing facilities at 800,000 direct labour hours for the year, which served as the denominator activity in the predetermined overhead rate. The total budgeted manufacturing overhead for the year was $2,000,000, of which $1,600,000 was variable and $400,000 was fixed. The standard variable overhead rate was $2 per direct labour hour. The standard direct labour time was 3 direct labour hours per unit. The actual results for the year are presented below: Actual Finished Units Actual Direct Labour Hours Actual Variable Overhead Actual Fixed Overhead 250,000 764,000 $1,610,000 $ 392,000 A. What was the variable overhead spending variance for the year? B. What was the variable overhead efficiency variance for the year?

Answer rating: 100% (QA)

To calculate the variable overhead spending variance we need to compare the actual variable overhead costs incurred with the budgeted variable overhea... View the full answer