Question

Suski 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 7,400 MHs Actual level of activity 7,500 MHs Standard variable manufacturing overhead rate $5.90 per MH Actual total variable manufacturing overhead $42,750 What was the variable overhead rate variance for the month? Group of answer choices $1,500 Favorable $590 Unfavorable $910 Favorable $1,000 Unfavorable

Answer 1

Answer:

$1,500 Favorable

Explanation:

The computation of the variable overhead rate variance is given below;

We know that

Variable Overhead rate variance =  (Standard Rate - Actual rate) ×Actual Quantity

= ($5.90 - ($42,750 ÷ 7,500) × 7500

= ($5.90 - $5.70) × 7500

=  $1,500 Favourable

Hence, the variable overhead rate variance is $1,500 favorable