- Riverside Corporation's variable overhead spending variance for April was $3,200 unfavorable. If the actual variable overhead costs were $127,800 and the standard variable overhead rate is $16 per direct labor hour, how many direct labor hours were actually worked during April?
Answer: 7,700 hours
The spending variance formula is: Actual variable overhead - (Actual hours × Standard rate) = Spending variance. Substituting known values: $127,800 - (Actual hours × $16) = $3,200 unfavorable. Rearranging: $127,800 - $3,200 = Actual hours × $16. Therefore: $124,600 = Actual hours × $16. Actual hours = $124,600 ÷ $16 = 7,787.5 hours, which rounds to approximately 7,700 hours. The other choices result from common arithmetic errors or incorrect formula application.
- Considering Alpine's October performance, what can management conclude about the variable overhead spending variance?
Answer: The variance is $425 favorable, suggesting effective cost control despite operational problems
The variable overhead spending variance = Actual variable overhead - (Actual hours × Standard rate) = $46,750 - (5,100 × $9.25) = $46,750 - $47,175 = $425 favorable. This indicates that despite the equipment problems that caused inefficiency, management was able to control variable overhead costs below the standard rate for the actual hours worked. Choice B incorrectly shows unfavorable. Choices C and D use incorrect variance amounts.
- Metro Industries is analyzing its variable overhead variances and has determined that the spending variance is $2,100 favorable while the efficiency variance is $1,800 unfavorable. If the standard variable overhead rate is $12 per machine hour and 4,500 machine hours were actually used, what were the standard machine hours allowed for the actual production level?
Answer: 4,350 machine hours
The efficiency variance formula is (Actual hours - Standard hours allowed) × Standard rate. Given: Efficiency variance = $1,800 unfavorable, Standard rate = $12, Actual hours = 4,500. Therefore: $1,800 = (4,500 - Standard hours allowed) × $12. Solving: $1,800 ÷ $12 = 150 hours difference. Since the variance is unfavorable, actual hours exceeded standard hours: 4,500 - 150 = 4,350 standard hours allowed. The other choices represent common calculation errors or misinterpretation of the variance direction.
