A. This is actual total overhead minus applied fixed overhead minus (Standard Variable OH Rate × Actual Application Base). The fixed overhead amount subtracted should be the budgeted fixed overhead, not the applied fixed overhead.

B. This is the actual total overhead minus budgeted fixed overhead. It is incorrect for two reasons. First, if the calculation were correct, the variance would be an unfavorable one, not a favorable one, because the actual was higher than the budgeted amount and this is a cost variance. And second, variable overhead is included in the total actual overhead amount but is not included in the amount that is subtracted from total actual overhead.

C. This is actual total overhead minus applied total overhead (fixed and variable). It correctly indicates an unfavorable variance, but the calculation is missing the budgeted element. See correct answer for a full explanation.

D. The total overhead spending variance is the total of the fixed overhead spending variance + the variable overhead spending variance.

The fixed overhead spending variance is:

Actual Fixed Overhead Incurred Minus Budgeted Fixed Overhead.

The variable overhead spending variance is: 

Actual Variable Overhead Incurred Minus Budgeted Variable Overhead Based on Inputs Actually Used (standard rate × actual usage of application base).

Therefore, the total overhead spending variance (fixed and variable) is calculated as follows:

           Actual Total Overhead Incurred

Minus:   Budgeted Fixed Overhead

Minus:   Budgeted Variable Overhead (Rate × Actual Application Base)

             ——————————————————————————————

Equals:  Total Overhead Spending Variance

Actual Total Overhead = $1,600,000

Budgeted Fixed Overhead = $1,500,000

Budgeted Variable OH (Rate × Actual Application Base) = $.50 × 430,000 = $215,000

Therefore, the total overhead spending variance = $1,600,000 - $1,500,000 - $215,000 = $(115,000).

Since overhead is a cost, a negative variance is a favorable variance.