Question

Handerson Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 10.3 kilos $ 7.80 per kilo Direct labor 0.3 hours $ 38.00 per hour Variable overhead 0.3 hours $ 7.80 per hour The company reported the following results concerning this product in August. Actual output 5,000 units Raw materials used in production 30,830 kilos Purchases of raw materials 33,400 kilos Actual direct labor-hours 1,110 hours Actual cost of raw materials purchases $ 213,920 Actual direct labor cost $ 24,536 Actual variable overhead cost $ 9,340 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 August is:

Answer 1

Variable manufacturing overhead rate variance= $677.1 unfavorable

Step-by-step explanation:

Giving the following information:

Standard:

Variable overhead 0.3 hours $ 7.80 per hour

Actual output 5,000 units

Actual direct labor-hours 1,110 hours

Actual variable overhead cost $ 9,340

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

Variable manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity

Actual rate= 9,340/1,110= $8.41

Variable manufacturing overhead rate variance= (7.8 - 8.41)*1,110

Variable manufacturing overhead rate variance= $677.1 unfavorable