Question

Hanson Inc. has the following variable manufacturing overhead standard to manufacture one Zippy:

Answer 1

Answer:

Variable manufacturing overhead rate variance= $465 unfavorable

Variable overhead efficiency variance= $150 unfavorable

Explanation:

Giving the following information:

Standard:

1.5 standard hours per Zippy at $3.00 per direct labor hour

Actual:

1,550 hours to make

1,000 Zippies

$5,115 was spent

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

Variable manufacturing overhead rate variance= (standard rate - actual rate)* actual quantity

Actual rate= 5,115/1,550= $3.3

Variable manufacturing overhead rate variance=  (3 - 3.3)*1,550

Variable manufacturing overhead rate variance= $465 unfavorable

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

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

Variable overhead efficiency variance= (1.5*1,000 - 1,550)*3

Variable overhead efficiency variance= $150 unfavorable