Question

Robert Company, which allocates overhead to production on the basis of machine hours, reported the following data for the period just ended:
Actual units produced: 12,000
Actual variable overhead incurred: $77,770
Actual machine hours worked: 18,800
Standard variable overhead cost per machine hour: $4.50

Robert estimates that it takes 1.5 hours to manufacture a completed unit.

Required:
Compute all standards & variances. Prepare all journal entries using standard costing.

Answer 1

Answer:

Variable overhead rate variance = Actual Variable overhead incurred - Actual Hours of Input, at Standard Rate

Variable overhead rate variance = ($4.5*18800 - $77,700)

Variable overhead rate variance  = $6,900 Favorable

Variable overhead efficiency variance = Actual Hours of Input, at Standard Rate - Standard Hours allowed for Actual Output at Standard Rate

Variable overhead efficiency variance = (12000*1.5 - $18,800)*$4.5 =

Variable overhead efficiency variance  = $3,600 Unfavorable

Variable overhead cost variance = Actual Variable overhead incurred - Standard Hours allowed for Actual Output at Standard Rate

Variable overhead cost variance  = (12000*1.5*$4.5) - $77,700

Variable overhead cost variance  = $3,300 Favorable