Reference no: EM132610232
The Ferris Company applies manufacturing overhead costs to products on the basis of direct labour hours. The standard cost card shows that 3 direct labour hours are required per unit of product. For August, the company budgeted to work 90,000 direct labour hours and to incur the following total manufacturing overhead costs:
Total Variable Overhead Costs $99,000
Total Fixed Overhead Costs $118,000
During August, the company completed 28,000 units of product, worked 86,000 direct labour hours, and incurred the following total manufacturing overhead costs:
Total Variable Overhead Costs $98,900
Total Fixed Overhead Costs $115,300
The denominator activity used for the predetermined overhead rate was 90,000 direct labour hours.
Problem 1: For August, what was the variable overhead spending variance?
A) $6,500 favourable.
B) $6,500 unfavourable.
C) $4,300 favourable.
D) $4,300 unfavourable.