Red Company

Red Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Red produced 4,500 units:

Standard:
DLH per unit	2.50
Variable overhead per DLH	$1.75
Fixed overhead per DLH	$3.10
Budgeted variable overhead	$21,875
Budgeted fixed overhead	$38,750
Actual:
Direct labor hours	10,000
Variable overhead	$26,250
Fixed overhead	$38,000

15. What is the variable overhead spending variance?

	a.	$4,375 U
	b.	$4,375 F
	c.	$8,750 U
	d.	$6,562 U