What was the actual variable overhead cost incurred in the variable overhead data?

What was the actual variable overhead cost incurred in the variable overhead data?

• A. $60,000
• B. $61,000
• C. $64,000
• D. $62,000

Answer: (B)

The key idea here is what “actual variable overhead cost incurred” means in cost accounting. It is the real amount of variable overhead that was spent during the period, as recorded in the accounting records. This includes costs that vary with production, such as indirect materials, indirect labor, and utilities tied to activity, and it reflects the cash outlay for those items in the period. When you’re given variable overhead data, you’re looking for the total of those actual expenditures. That figure is used to compute variances by comparing it to the standard variable overhead cost allowed for the actual level of activity. If actual spending is higher than the standard allowance, the variance is unfavorable; if lower, it’s favorable. The other numbers in the data typically represent budgeted or standard amounts, or amounts allocated under a standard cost system, not what was actually spent. So the correct figure is the one that represents the true, period-wide variable overhead outlay.

The key idea here is what “actual variable overhead cost incurred” means in cost accounting. It is the real amount of variable overhead that was spent during the period, as recorded in the accounting records. This includes costs that vary with production, such as indirect materials, indirect labor, and utilities tied to activity, and it reflects the cash outlay for those items in the period.

When you’re given variable overhead data, you’re looking for the total of those actual expenditures. That figure is used to compute variances by comparing it to the standard variable overhead cost allowed for the actual level of activity. If actual spending is higher than the standard allowance, the variance is unfavorable; if lower, it’s favorable.

The other numbers in the data typically represent budgeted or standard amounts, or amounts allocated under a standard cost system, not what was actually spent. So the correct figure is the one that represents the true, period-wide variable overhead outlay.