Esquire clothing is a manufacturer of designer suits. the cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). variable manufacturing overhead cost is allocated to each suit on the basis of budgeted direct manufacturing labor-hours per suit. for june 2017, each suit is budgeted to take 4 labor-hours. budgeted variable manufacturing overhead cost per labor-hour is $12. the budgeted number of suits to be manufactured in june 2017 is 1,040. actual variable manufacturing costs in june 2017 were $52,164 for 1,080 suits started and completed. there were no beginning or ending inventories of suits. actual direct manufacturing labor-hours for june were 4,536.compute the flexible- budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead.

(i) $328 Unfavorable

(ii) $2,268 Favorable

(iii) $2,592 Unfavorable

Explanation:

Total budgeted hours for actual output (SH):

= Actual units × Budgeted hours per suite

= 1,080 suits × 4 hours

= 4,320 hours

Actual variable overhead rate (AR) = Actual cost ÷ Actual hours

                                                          = $52,164 ÷ 4,536

                                                          = $11.5 per hour

Variable overhead spending variance:

= (Standard rate - Actual rate) × Actual hours

= ($12 - $11.5) × 4,536

= $2,268 Favorable

Variable overhead efficiency variance:

= (Standard hours - Actual hours) × Standard rate

= (4,320 - 4,536) × $12

= $2,592 Unfavorable

Flexible- budget variance:

= variable overhead spending variance + Variable overhead efficiency variance

= $2,268 Favorable + $2,592 Unfavorable

= $328 Unfavorable

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