Question

Wisteria Co. produces snowboards and uses a standard cost system. Variable overhead is applied using direct labor hours. Standards allowed for each unit are 5.3 hours of labor at a standard variable overhead rate of $7.20. During December, Wisteria Co. produced 3,000 snowboards. Materials purchases totaled 21,500 pounds at a total cost of $224,780. Materials usage totaled 21,060 pounds. Payroll totaled $183,730 for 17,130 hours worked. Variable overhead incurred totaled $120,466. a. Calculate the variable overhead rate variance. (Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)

Answer 1

Variable overhead rate variance = $2,870 favorable

Step-by-step explanation:

Variable overhead rate variance is the difference between the standard cost allowed for variable production overhead and the actual variable cost incurred.

This computed as follows:

$

17,130 hours should have cost ( 17,130 ×7.20) 123336

but did cost 120,466

Variable overhead rate variance 2870 Favorable

Variable overhead rate variance = $2,870