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Question - H&B Inc. uses a standard cost system and calculates their application rates using direct labour hours.
This year the company had the following standards:
Standard direct labour hours per unit: 2 hours
Variable overhead application rate: $5 per direct labour hour
Fixed overhead application rate: $7 per direct labour hour
The company also had the following actuals:
Production: 17,000 units
Variable overhead: $195,840
Fixed overhead: $271,320
Total direct labour hours: 40,800
Required - What is the variable overhead spending variance?
a) $8,160 unfavourable
b) $25,840 unfavourable
c) $8,160 favourable
d) $25,840 favourable
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