Question

Irving Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or HoursStandard Price or RateStandard Cost Per Unit Direct labor 0.20hours$33.00per hour$6.60 Variable overhead 0.20hours$6.90per hour$1.38 In November the company's budgeted production was 7,200 units, but the actual production was 7,000 units. The company used 1,520 direct labor-hours to produce this output. The actual variable overhead cost was $9,880. The company applies variable overhead on the basis of direct labor-hours. The variable overhead rate variance for November is:

Answer 1

Variable overheads rate variance = $608 favorable

Step-by-step explanation:

The variable overhead rate variance is the difference between the standard cost of the actual labour hours and the actual variable overhead expenditure

$

1,520 hours should have cost (1,520× $6.90) 10,488

But did cost 9,880

Rate variance 608 Favorable

Variable overheads rate variance = $608 favorable