Question

Total Variable Overhead Variance Mulliner Company showed the following information for the year:

Standard variable overhead rate (SVOR) per direct labor hour $3.50
Standard hours (SH) allowed per unit 3
Actual production in units 20,000
Actual variable overhead costs $220,500
Actual direct labor hours 61,200
Required:
1. Calculate the standard direct labor hours for actual production.
2. Calculate the applied variable overhead.
3. Calculate the total variable overhead variance.

Answer 1

1. The standard direct labor hours for actual production

Standard hours per unit: 3 hours

Actual output: 20,000

Standard labour hours for actual production = 20,000 * 3

=60,000 hours

2. Applied variable Overhead

Standard hours allowed per unit = 3

Overhead rate per hour = $3.5

Standard Overhead rate per unit = Standard hours allowed per unit * OH rate per hour =3 hours * $3.5

=10.5

Actual output = 20000

Variable OH applied = Actual output * Standard Overhead rate per unit

= 20,000 * $10.5

= $210,000

3. Total Variable Overhead variance

Actual Oh incurred $220,500

Std variable Overhead to be allowed $210,000

Total Variable OH variance $10,500 (Unfavourable)