B. This answer results from using the actual amount of labor hours (94,000) to calculate the budgeted fixed overhead costs instead of the budgeted labor hours (100,000). We use the budgeted amount of labor hours (100,000) because fixed costs do not vary with the level of production, and we need to calculate what the total budgeted fixed overhead amount was that the company used in its calculation of the cost per direct labor hour.

C. This answer is incorrect. See the correct answer for a complete explanation.

D. The fixed overhead budget/spending variance is the difference between the actual fixed overhead amount and the budgeted fixed overhead costs. The actual amount of fixed overhead costs was $540,000. The budgeted amount of fixed overhead was $500,000 ($5 of fixed overhead per labor hour multiplied by 100,000 budgeted labor hours). We use the budgeted amount of labor hours (100,000) because fixed costs do not vary with the level of production, and we need to calculate what the total budgeted fixed overhead amount was that the company used in its calculation of the cost per direct labor hour. Thus, the amount of fixed cost budgeted is the same for any level of production. The fixed overhead budget/spending variance is $40,000 unfavorable ($540,000 - $500,000). The actual fixed overhead costs incurred were higher than the budgeted amount, so the variance is unfavorable.