Dubberly Corporation's cost formula for its manufacturing overhead is $31,100 per month plus $50 per machine-hour. For the month of March, the company planned for activity of 8,000 machine-hours, but the actual level of activity was 7,930 machine-hours. The actual manufacturing overhead for the month was $454,110. The spending variance for manufacturing overhead in March would be closest to:

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Business

Cristian

19 September, 13:20

Dubberly Corporation's cost formula for its manufacturing overhead is $31,100 per month plus $50 per machine-hour. For the month of March, the company planned for activity of 8,000 machine-hours, but the actual level of activity was 7,930 machine-hours. The actual manufacturing overhead for the month was $454,110. The spending variance for manufacturing overhead in March would be closest to:

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Dashawn Flores · Answer 1

Manufacturing overhead spending variance = $26,724 unfavorable

Explanation:

Giving the following information:

Dubberly Corporation's cost formula for its manufacturing overhead is $31,100 per month plus $50 per machine-hour.

For March, the company planned for activity of 8,000 machine-hours, but the actual level of activity was 7,930 machine-hours. The actual manufacturing overhead for the month was $454,110.

First, we need to calculate the estimated manufacturing overhead rate.

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = (31,100/8000) + 50 = $53.89 per machine hour.

Actual overhead rate = 454,110/7,930 = $57.26

Manufacturing overhead spending variance = (standard rate - actual rate) * actual quantity

Manufacturing overhead spending variance = (53.89 - 57.26) * 7,930 = $26,724 unfavorable