Megan, Inc

Multiple Choice

Megan, Inc. uses the following standard costs per unit for one of its products: Direct labor (2.0 hrs. @ $5.00/hr.) = $10.00; overhead (2.0 hrs. @ $2.50/hr.) = $5.00. The flexible budget for overhead is $120,000 plus $1.00 per direct labor hour (DLH) . Actual data for the past month show total overhead costs of $225,000, total fixed overhead of $123,000, 85,000 hours worked, and 40,000 units produced.

The variable overhead spending variance for the past month for Megan, Inc., to the nearest whole dollar, was:

A) $0.
B) $3,000 unfavorable.
C) $5,000 unfavorable.
D) $17,000 unfavorable.
E) Cannot be determined without additional information.