Question

45.

Novelli Corporation makes a product whose variable overhead standards are based on direct labor-hours. The quantity standard is 0.7 hours per unit. The variable overhead rate standard is $7.50 per hour. In September, the company produced 1,800 units using 1,250 direct labor-hours. The actual variable overhead rate was $8.10 per hour.

The variable overhead rate variance for September is:

Noreen 4e Rechecks 2017-24-03

$789 F

$789 U

$750 U

$750 F

Answer 1

Standard labor-hours per unit = 0.70
Standard variable overhead rate per hour = $7.50
Actual number of units produced = 1,800
Actual variable overhead rate per hour = $8.10
Actual labor-hours worked = 1,250

Standard labor-hours allowed = Standard labor-hours per unit * Actual number of units produced
Standard labor-hours allowed = 0.70 * 1,800
Standard labor-hours allowed = 1,260

Variable Overhead Rate Variance = Actual labor-hours worked * (Actual variable overhead rate per hour - Standard variable overhead rate per hour)
Variable Overhead Rate Variance = 1,250 * ($8.10 - $7.50)
Variable Overhead Rate Variance = $750 Unfavorable