Question

Speaker City designs and manufactures high - end home theater speakers. Speaker City uses a standard overhead rate of 3.5 hours per unit at a cost of $9.50 per hour. Data for the month of June shows that Speaker City produced 500 units and recorded actual overhead costs of $19,500. What is the total variable overhead variance for the month of June? A. $14,750 favorable B. $14,750 unfavorable C. $2,875 favorable D. $2,875 unfavorable

Answer 1

D. $2,875 unfavorable

Step-by-step explanation:

The computation of the total variable overhead variance is shown below:

= Standard variable overhead cost - Actual variable overhead cost

where,

Standard variable overhead cost = Number of hours × rate per hour × number of units produced

= 3.5 hours × $9.50 per hour × 500 units

= $16,625

And, the actual variable overhead cost is $19,500

Now put these values to the above formula

So, the value would equal to

= $16,625 - $19,500

= $2,875 unfavorable