Neptune Inc. uses a standard cost system and has the following information for the most recent month, April:

Actual direct labor hours (DLHs) worked 17,000 Standard DLHs allowed for good output produced this period 18,000 Actual total factory overhead costs incurred$45,400 Budgeted fixed factory overhead costs$10,800 Denominator activity level, in direct labor hours (DLHs) 15,000 Total factory overhead application rate per standard DLH$2.70

The total factory overhead spending variance in April for Neptune, Inc., to the nearest whole dollar, was:

$940 unfavorable

1. Total factory overhead spending variance = Total actual overhead cost incurred ? Flexible budget for overhead based on inputs (i.e., based on actual DLHs worked).

2. Total actual overhead cost incurred during the period = $45,400 (given).

3. FB based on inputs = Budgeted fixed overhead + Budgeted variable overhead based on actual DLHs worked.

4. Budgeted fixed overhead = $10,800 (given).

5. Budgeted variable overhead based on DLHs worked = Standard variable overhead rate/DLH × actual DLHs worked.

6. Total budgeted overhead = Total OH rate/DLH × denominator hours = $2.70/DLH (given) × 15,000 DLHs (given) = $40,500.

7. Standard variable OH at denominator volume = Total OH budget $40,500 ? budgeted fixed OH (given) $10,800 = $29,700.

8. Therefore, standard variable OH rate/DLH = Standard VOH at denominator volume/denominator volume = $29,700/15,000 DLHs = $1.98/DLH.

9. FB for variable OH, based on actual DLHs worked = $1.98/DLH × 17,000 DLHs (given) = $33,660.

10. Thus, total factory OH spending variance = Total actual overhead cost incurred ? FB for overhead based on inputs = $45,400 ? ($10,800 + $33,660) = $45,400 ? $44,460 = $940U (to nearest whole dollar). Note: the variance here is unfavorable (U) because actual overhead cost incurred > budgeted overhead cost.