Question

The following standards for variable overhead have been established for a company that makes only one product:

Answer 1

Answer:

a. The variable overhead rate variance for the month is:

=  $7,771 F

b. The variable overhead efficiency variance for the month is:

= $672 U.

Explanation:

a) Data and Calculations:

Standard hours per unit of output = 6.8 hours

Standard variable overhead rate = $14.00 per hour

Total standard hours = 9,452 (6.8 * 1,390)

Actual hours = 9,500 hours

Actual total variable overhead cost = $125,230

Actual rate per hour = $13.18 ($125,230/$9,500)

Actual output = 1,390 units

Variable overhead rate variance for the month = (Standard rate - Actual rate) * Actual hours = $14 - $13.182 * 9,500 = $7,771 F

Variable overhead efficiency variance for the month = (Standard hours - Actual hours) * Standard Rate

= 9,452 - 9,500 * $14 = $672 U

Total variable overhead variance for the month = $7,099 F ($7,771 - $672)

Total standard variable overhead cost = 6.8 * $14 * 1,390 = $132,328

Actual variable overhead cost for the month =                       125,230

Variance for variable overhead cost for the month =              $7,098