Question

Highfill Corporation's variable overhead is applied on the basis of direct labor-hours. The standard cost card for product D80D specifies 6.5 direct labor-hours per unit of D80D. The standard variable overhead rate is $6.80 per direct labor-hour. During the most recent month, 1,300 units of product D80D were made and 8,500 direct labor-hours were worked. The actual variable overhead incurred was $60,290.
Required:

A. What was the variable overhead rate variance for the month?

B. What was the variable overhead efficiency variance for the month?

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Standard direct labor hour per unit= 6.5 hours

Standard variable overhead= $6.8 per direct labor hour.

Actual production= 1,300 units

Actual direct labor hours= 8,500 hours

Actual variable overhead= $60,290

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

Manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity

Actual rate= 60,290/8,500 hours= $7.093

Manufacturing overhead rate variance= (6.8 - 7.093)*8,500= $2,490.5 unfavorable

B) To calculate the variable overhead efficiency variance, we need to use the following formula:

variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate

Standard quantity= 1,300*6.5= 8,450 hours

variable overhead efficiency variance= (8,450 - 8,500)*6.8= $340 unfavorable