ICAEW BIP · Chapter 9 · Question 6 of 13
Variable production overheads are absorbed at a standard rate of £5 per labour hour worked. In the period, 4,900 labour hours were worked and actual variable overheads were £26,100. What is the variable overhead expenditure variance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) £1,600 adverse
Explanation
Expected variable overhead for the hours worked = 4,900 x £5 = £24,500. Actual = £26,100. Expenditure variance = £24,500 - £26,100 = £1,600 adverse. Hours worked are used because variable overheads are assumed not to be incurred during idle time.
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