Question

Doogan Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate
Direct materials		9.4	grams	$	4.00	per gram
Direct labor		0.4	hours	$	40.00	per hour
Variable overhead		0.4	hours	$	9.00	per hour

The company produced 7,200 units in January using 41,310 grams of direct material and 2,580 direct labor-hours. During the month, the company purchased 46,400 grams of the direct material at $3.70 per gram. The actual direct labor rate was $39.30 per hour and the actual variable overhead rate was $8.80 per hour.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead rate variance for January is:

• $516 U

• $576 F

• $516 F

• $576 U

Answer 1

• Correct Answer = Option #3: $ 516 F

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                9.00	-	$                       8.80	)	x	2580
	516
	Variance		$                  516.00			Favourable-F