Compute the variable overhead spending variance

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Problem - Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted information pertains to 2016:

Denominator volume-number of units 8,000

Denominator volume-percent of capacity 80%

Denominator volume-standard direct labor hours 24,000

Budgeted variable factory overhead cost at denominator volume $103,200

Total standard factory overhead rate per direct labor hour $15.10

During 2016, Bluecap worked 28,000 direct labor hours and manufactured 9,600 units. The actual factory overhead cost for the year was $14,000 greater than the flexible budget amount for the units produced, of which $6,000 was due to fixed factory overhead. In preparing a budget for 2017 Bluecap decided to raise the level of operation to 90% of capacity (a level it considers to be "practical capacity"), to manufacture 9,000 units at a budgeted total of 27,000 direct labor hours.

Required - Compute the variable overhead spending variance in 2016 for Bluecap Co.?

a. $6,000 unfavorable

b. $17,440 unfavorable

c. $9,200 favorable

d. $8,000 unfavorable

e. $11,440 unfavorable

Reference no: EM132473128

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