Question

Viger Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity 9,200 MHs Actual level of activity 9,400 MHs Standard variable manufacturing overhead rate $ 7.90 per MH Actual total variable manufacturing overhead $ 71,610 What was the variable overhead rate variance for the month

Answer 1

Answer:

2,650 favorable

Explanation:

manufacturing variable overhead variance:

standard rate x actual cost driver - actual cost

$7.90 per machine hours x 9,400 Machine Hours - $71,610 actual cost

74,260 - 71,610 =  2,650 variance

The variance is favorable, as the actual cost were below standard.

It is important to identify the cost driver on which the rate is expressed. For this assignment we are given just one expression of machine hours. But, on a complete assignment we will be working with materials, direct labor cost, direct labor hours and other, we need to check what is the base for overhead.