Zero Company's standard factory overhead rate is $3.73 per direct labor hour (DLH), calculated at 90% capacity = 700 standard DLHs. In December, the company operated at 80% of capacity, or 622 standard DLHs. Budgeted factory overhead at 80% of capacity is $3,020, of which $1,540 is fixed overhead. For December, the actual factory overhead cost was $3,900 for 700 actual DLHs, of which $1,290 was for fixed factory overhead.

Under a four-way breakdown (decomposition) of the total overhead variance, what is the variable factory overhead spending variance for Zero Company for December (to the nearest whole dollar)? (Round your intermediate calculation to 2 decimal places.)

$944 unfavorable

1. Variable OH spending variance = Actual variable OH cost incurred ? FB for variable OH, based on inputs (i.e., based on actual DLHs worked).

2. Actual variable OH cost incurred = total overhead cost incurred during the period ? actual fixed overhead cost for the period = $3,900 (given) ? $1,290 (given) = $2,610.

3. Standard variable OH rate/DLH = budgeted variable OH @ 80% capacity/DLHs @ 80% capacity = ($3,020 ? $1,540)/622 DLHs (given) = $1,480/622 DLHs = $2.38/DLH.

4. FB for variable overhead, based on inputs = Standard variable OH rate/DLH × Actual DLHs worked = $2.38/DLH × 700 DLHs (given) = $1,666.

5. Therefore, variable OH spending variance = $2,610 (see (2) above) ? $1,666 (see (4) above) = $944U (to nearest whole dollar).

Note: the variance here is unfavorable (U) because actual variable overhead cost for the period > budgeted variable overhead cost (based on actual DLHs worked).