Question

a manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. the company bases its variable manufacturing overhead standards on direct labor-hours. standard hours per unit of output 4.30 direct labor-hours standard variable overhead rate $11.56 per direct labor-hour the following data pertain to operations for the last month: actual direct labor-hours 8,700 direct labor-hours actual total variable manufacturing overhead cost $ 95,900 actual output 2,000 units what is the variable overhead rate variance for the month? multiple choice $4,672 f $4,953 u $4,953 f $4,672 u

Answer 1

The variable overhead rate variance for the month is $1,252 unfavorable.

Step-by-step explanation:

The variable overhead rate variance for the month can be calculated by subtracting the actual variable overhead cost from the standard variable overhead cost based on the actual hours worked.

Actual variable overhead cost = Actual direct labor-hours * Standard variable overhead rate

Standard variable overhead cost = Standard hours per unit * Actual output * Standard variable overhead rate

Variable overhead rate variance = Standard variable overhead cost - Actual variable overhead cost

Using the given data:

Actual direct labor-hours = 8,700

Actual output = 2,000 units

Standard hours per unit = 4.30

Standard variable overhead rate = $11.56 per direct labor-hour

Substituting these values into the formula:

Actual variable overhead cost = 8,700 * $11.56 = $100,692

Standard variable overhead cost = 4.30 * 2,000 * $11.56 = $99,440

Variable overhead rate variance = $99,440 - $100,692 = -$1,252

Therefore, the variable overhead rate variance for the month is $1,252 unfavorable.