Question

Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:

	Standard Quantity			Standard Price or Rate			Standard Cost
Direct materials		7.40	pounds	$	1.20	per pound	$	8.88
Direct labor		0.40	hours	$	49.50	per hour	$	19.80
Variable manufacturing overhead		0.40	hours	$	10.10	per hour	$	4.04

During March, the following activity was recorded by the company:

The company produced 4,000 units during the month.

A total of 21,000 pounds of material were purchased at a cost of $15,180.

There was no beginning inventory of materials on hand to start the month; at the end of the month, 5,220 pounds of material remained in the warehouse.

During March, 1,250 direct labor-hours were worked at a rate of $46.50 per hour.

Variable manufacturing overhead costs during March totaled $15,661.

The direct materials purchases variance is computed when the materials are purchased.

The variable overhead rate variance for March is:

Multiple Choice

$3,593 F

$3,036 F

$3,036 U

$3,593 U

Answer 1

Calculation of Variable Overhead Rate Varience
Variable Overhead Standard Rate per Hour	10.1
Variable Overhead Actual Rate Per Hour	12.53
=15661/1250
Actual Hours Worked to manufacture 4000 Units =	1250 Hrs
Variable Overhead Rate Varience =	=(Standard Rate-Actaul Rate)*Actual Hours Worked
	=(10.1-12.53)*1250
	-3036 Unfavourable
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