Use the following data to calculate the overhead variances: Budgeted output units 6,400Budgeted fixed manufacturing OH $40,000Budgeted variable manufacturing OH $5 per direct labor hourBudgeted direct manufacturing labor hours 2 hours per unit Fixed manufacturing OH costs incurred $43,000Direct manufacturing labor hours used 14,900Variable manufacturing OH costs incurred $64,600Actual units manufactured 6,200 Both fixed and variable overhead allocation are based on direct labor hours. Calculate the spending variance for fixed OH. Please enter only the numerical dollar amount and omit any labels such as “favorable” or “unfavorable.”

Question

BlackTom AI · Accepted Answer

Fixed overhead spending variance equals actual fixed manufacturing overhead incurred minus the budgeted (flexible‑budget) fixed manufacturing overhead. It measures how actual fixed costs differ from the planned fixed cost level and is independent of activity.

Step-by-step calculation and relevant concepts:
1. Budgeted fixed manufacturing OH (given) = $40,000.
2. Actual fixed manufacturing OH incurred (given) = $43,000.
3. Fixed overhead spending variance = Actual fixed OH − Budgeted fixed OH
   = $43,000 − $40,000
   = $3,000 (unfavorable).

Show intermediate computations that clarify related concepts (not required for the spending variance but useful to avoid confusion):
- Budgeted direct labor hours = Budgeted output units × DLH per unit = 6,400 × 2 = 12,800 DLH.
- Predetermined fixed OH rate = Budgeted fixed OH / Budgeted DLH = $40,000 / 12,800 = $3.125 per DLH.
- Standard hours allowed for actual production = Actual units × DLH per unit = 6,200 × 2 = 12,400 DLH.
- Applied fixed OH = Standard hours allowed × Predetermined rate = 12,400 × $3.125 = $38,750.
- Fixed overhead volume variance = Budgeted fixed OH − Applied fixed OH = $40,000 − $38,750 = $1,250 (unfavorable).
- Total fixed OH variance = Actual − Applied = $43,000 − $38,750 = $4,250, which equals Spending variance ($3,000) + Volume variance ($1,250).

Why the correct answer is $3,000:
- Spending variance compares actual fixed costs directly to the budgeted fixed amount; hence $43,000 − $40,000 = $3,000.
Why other potential numbers would be incorrect:
- $1,250 is the volume variance, not the spending variance.
- $4,250 is the total fixed OH variance (actual − applied), not the spending variance.
- $0 would imply actual fixed costs equaled budgeted, which they do not.

Final confirmation: the fixed overhead spending variance is 3000.

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