Use the following information of Alfred Industries. Standard manufacturing overh

Question

Use the following information of Alfred Industries. Standard manufacturing overhead based on normal monthly volume: $15.01 Fixed ($300,200 ÷ 20,000 units) Variable ($100,000 ÷ 20,000 units) 5.00 20.01 18,000 units Units actually produced in current month Actual overhead costs incurred (including $30e,000 fixed) $383,800 Compute the overhead spending variance and the volume variance. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance).) Overhead spending variance Overhead volume variance

Explanation / Answer

Overhead spending variance                                   $6400 F

Volume variance                                                    ($30020) U

Explanation:

Overhead spending variance:

Overhead budgeted for actual production (18000 units):

Fixed                                                      $300200

Variable ($5 per unit × 18,000 units)    $90000

Overhead per flexible budget                                $390200

Actual overhead                                                     $383800

Overhead spending variance                                    $6400F

Volume variance:

Overhead applied to Work in Process

Inventory at standard cost (18,000 units × $20.01/unit)       $360180

Less: Budgeted overhead for 18,000 unit production level    $390200

Volume variance                                                               (30020)U

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