Zeta, Inc., produces handwoven rugs. Budgeted production is 5,000 rugs per month and the standard...
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Zeta, Inc., produces handwoven rugs. Budgeted production is 5,000 rugs per month and the standard direct labor required to make each rug is 2 hours. All overhead is allocated based on direct labor hours. Zeta's manager is interested in what caused the recent month's $3,000 unfavorable overhead variance. The following information was available to aid in the analysis:
| Production in units | 5,000 | 4,500 | |||||||
| Total labor hours | 10,000 | 9,000 | |||||||
| Total variable overhead | $ | 60,000 | $ | 55,000 | |||||
| Total fixed overhead | 40,000 | 38,000 | |||||||
| Total overhead | $ | 100,000 | $ | 93,000 | |||||
| 1. What was the overhead spending variance for the month?
|
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