Question

Majer Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 6.5 ounces $ 3.00 per ounce $ 19.50 Direct labor 0.5 hours $ 10.00 per hour $ 5.00 Variable overhead 0.5 hours $ 3.00 per hour $ 1.50 The company reported the following results concerning this product in February. Originally budgeted output 5,600 units Actual output 5,200 units Raw materials used in production 31,100 ounces Actual direct labor-hours 2,010 hours Purchases of raw materials 33,500 ounces Actual price of raw materials $ 122.90 per ounce Actual direct labor rate $ 132.40 per hour Actual variable overhead rate $ 2.10 per hour 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 February is:

Answer 1

Answer: $1,770

Explanation:

Given that,

budgeted output = 5,600 units

Actual output = 5,200

units Raw materials used in production = 31,100 ounces

Actual direct labor-hours = 2,010 hours

Purchases of raw materials = 33,500 ounces

Actual hours = 2,010 hours

Standard Rate = $3.00 per hour

Standard Hours = Actual output × Standard hour per unit of output

                           = 5,200 × 0.5 hours

                           = 2600 hours

Variable overhead efficiency Variance:

= (Standard hours - Actual hours) × Standard Rate  

= (2600 hours - 2,010 hours) × $3.00 per hour

= $1,770