Question

The Penguin Company uses standard costs. Their standards specify .5 direct labor hours per unit of product. Variable overhead is allocated based on direct labor hours. Beginning of the year, static budget standards: Budgeted production volume in units 7,000 Budgeted variable overhead costs $23,000 Budgeted direct labor hours 600 At the end of the year, actual data is: Production Volume in units 6,800 Actual variable overhead costs $20,000 Actual direct labor hours 550 1. What is the variable overhead standard cost per DIRECT LABOR HOUR

Answer 1

Variable overheads standard cost per direct labour hour =$38.3

Step-by-step explanation:

Where overheads are charged to products using direct labour hours, an overheads absorption rate is computed as follows:

Variable overheads absorption rate= Budgeted variable overheads/Budgeted direct labour hours

= $23,000/600 hours= $38.3

Variable overheads standard cost per direct labour hour =$38.3