ExpertHard2 marksMultiple Choice
ACCA · Question 26 · Syllabus E: Standard costing
An automated warehouse uses variable overheads based on machine hours.
Standard variable overhead rate: $4 per machine hour.
Standard time per unit: 2 hours.
Actual units produced: 1,000.
Actual machine hours worked: 2,100.
Actual variable overheads incurred: $8,600.
What is the Variable Overhead Expenditure Variance?
An automated warehouse uses variable overheads based on machine hours.
Standard variable overhead rate: $4 per machine hour.
Standard time per unit: 2 hours.
Actual units produced: 1,000.
Actual machine hours worked: 2,100.
Actual variable overheads incurred: $8,600.
What is the Variable Overhead Expenditure Variance?
Answer options:
A.
$600 Adverse
B.
$200 Adverse
C.
$400 Adverse
D.
$200 Favorable
How to approach this question
Expenditure Variance compares the actual cost incurred against what SHOULD have been spent for the ACTUAL hours worked. Formula: (Actual Hours × Standard Rate) - Actual Cost.
Full Answer
B.$200 Adverse✓ Correct
Variable Overhead Expenditure Variance isolates the difference in the spending rate.
It is calculated as: (Actual Hours × Standard Rate) - Actual Cost.
Expected cost for actual hours = 2,100 hours × $4 = $8,400.
Actual cost = $8,600.
Variance = $8,400 - $8,600 = -$200 (Adverse, because they spent more than the standard rate for the hours worked).
Common mistakes
Calculating the total variance or the efficiency variance instead of the expenditure variance.
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