Accounting SmartBook Practice Test

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The fixed overhead spending variance is derived from these data: Actual fixed overhead cost incurred $21,000; Budgeted fixed overhead $20,000; Applied fixed overhead $24,000.

$1,000 F $-1,000 F $-1,000 U $1,000 U

Correct Answer:

$1,000 U

Explanation:

Fixed overhead spending variance shows whether actual fixed overhead costs came in higher or lower than what was budgeted, focusing only on actual vs budgeted costs rather than how much overhead was allocated to production. Here, actual fixed overhead incurred is 21,000 and budgeted fixed overhead is 20,000. The difference is 1,000, and because actual costs exceed the budget, it’s unfavorable. So the spending variance is 1,000 U. The applied fixed overhead of 24,000 relates to the volume variance (how much overhead was allocated to production) and is not part of the spending variance.

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