Question

Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:

Standard Quantity Standard Price or Rate Standard Cost
Direct materials 2.5 pounds $ 5.75 per pound $ 14.38
Direct labor 0.5 hours $ 17.00 per hour $ 8.50
Variable manufacturing overhead 0.5 hours $ 4.00 per hour $ 2.00

During March, the following activity was recorded by the company:

The company produced 5,200 units during the month.
A total of 16,500 pounds of material were purchased at a cost of $46,200.
There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,300 pounds of material remained in the warehouse.
During March, 2,800 direct labor-hours were worked at a rate of $17.50 per hour.
Variable manufacturing overhead costs during March totaled $5,800.

The direct materials purchases variance is computed when the materials are purchased.The variable overhead rate variance for March is: ____________.

Answer 1

Manufacturing overhead rate variance= $5,404 favorable

Step-by-step explanation:

Giving the following information:

Variable manufacturing overhead 0.5 hours $4.00 per hour

During March, 2,800 direct labor-hours were worked.

Variable manufacturing overhead costs during March totaled $5,800.

To calculate the variable overhead rate variance, we need to use the following formula:

Manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity

Actual rate= 5,800/2,800= $2.07

Manufacturing overhead rate variance= (4 - 2.07)*2,800

Manufacturing overhead rate variance= $5,404 favorable