Question

Kartman Corporation makes a product with the following standard costs:

Standard Quantity Standard Price Standard Cost/Unit
Direct materials 6.7 pounds $ 7.20 per pound $ 48.24
Direct labor 0.6hours $26.00 per hour $ 15.60
Variable overhead 0.6 hours $4.20 per hour $ 2.52


In June the company's budgeted production was 5,200 units but the actual production was 5,300 units. The company used 23,950 pounds of the direct material and 2,470 direct labor-hours to produce this output. During the month, the company purchased 27,200 pounds of the direct material at a cost of $188,180. The actual direct labor cost was $58,821 and the actual variable overhead cost was $13,431.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead rate variance for June is:

Answer 1

variable overhead rate variance $ 6,297 favourable

Explanation:

The variable overhead rate variance is the difference between the actual variable overhead cost and the actual hours multiplied by the standard variable overhead rate.

$

2740 hours should have cost (2740×$4.20) 19728

but did cost 13,431.

variable overhead rate variance 6,297 favourable