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Financial and Managerial Accounting Module 23 Refer to following question. I don't understand why part...

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Accounting

Financial and Managerial Accounting Module 23 Refer to following question. I don't understand why part b is Unfavorable when Actual costs are less than standard costs?

3. Ginger Manufacturing is analyzing variable overhead variances for the fiscal period just ended. The flexible budget called for $176,000 in variable overhead but actual variable overhead was $100,000. In computing the overhead variances, Greens management discovered that it had used 40,000 pounds of direct material, rather than the budgeted amount of 44,000 pounds. (Pounds of direct material is the single overhead driver of variable overhead). The standard variable overhead rate per pound of direct material is $2.00.

a. Compute Gingers variable overhead efficiency variance. ANSWER: Rationale: Variable overhead efficiency variance = SR(AQ-SQ) = $2(40,000 44,000) = -$8,000 (F)

b. Compute Ginger's variable overhead spending variance. ANSWER: Rationale: Variable overhead spending variance = Actual-(AQ*SR) = $100,000-(40,000 x $2) = $20,000 (U)

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