Explore BrainMass

### Explore BrainMass

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

Alberta Apparel Company, located in Calgary, uses a standard-costing system. The firm estimates that it will operate its manufacturing facilities at 800,000 machine hours for the year. The estimate for total budgeted overhead is \$2,000,000. The standard variable-overhead rate is estimated to be \$2 per machine hour or \$6 per unit. The actual data for the year follow.

Actual finished units 250,000
Actual machine hours 764,000.00

1. Compute the following variances. Indicate whether each is favorable or unfavorable where appropriate.

#### Solution Preview

Variable overhead spending variance = actual variable overhead costs - (standard variable rate x actual hours of machine used)
Here
Standard variable rate = \$2 per machine hour
Actual machine hours = 764,000
Variable overhead spending variance = 1,690,000-2X764,000 = \$162,000 Unfavorable since the actual cost is higher