Question

The following data have been provided by Lopus Corporation: budgeted production 2,600 units, standard machine-hours per unit 2.7 machine-hours, standard lubricants $4.20 per machine-hour, standard supplies $2.90 per machine-hour, actual production 2,900 units, actual machine-hours 8,080 machine-hours, actual lubricants (total) $35,151, actual supplies (total) $23,038.

Required: Compute the variable overhead rate variances for lubricants and for supplies. Indicate whether each of the variances is favorable (F) or unfavorable (U).

Answer 1

The variable overhead rate variances for lubricants and supplies can be calculated using certain formulas. The variances are then determined to be favorable or unfavorable.

Step-by-step explanation:

The variable overhead rate variances for lubricants and supplies can be calculated using the following formulas:

Lubricants variance = (Actual lubricants cost - Standard lubricants cost) / Actual machine-hours

Supplies variance = (Actual supplies cost - Standard supplies cost) / Actual machine-hours

Using the given data, the lubricants variance can be calculated as follows: (actual lubricants cost - (standard lubricants rate * actual machine-hours)) / actual machine-hours. The supplies variance can be calculated in a similar manner.

Based on the calculations, determine whether the variances are favorable (F) or unfavorable (U).