Question

Dirickson Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.

Inputs	Standard Quantity or Hours per Unit of Output			Standard Price or Rate
Direct materials		7.6	ounces	$	9.40	per ounce
Direct labor		0.10	hours	$	18.00	per hour
Variable manufacturing overhead		0.10	hours	$	5.30	per hour

1. The company has reported the following actual results for the product for July:

Actual output		7,600	units
Raw materials purchased		63,000	ounces
Actual cost of raw materials purchased	$	541,800
Raw materials used in production		57,750	ounces
Actual direct labor-hours		820	hours
Actual direct labor cost	$	16,072
Actual variable overhead cost	$	4,592

The variable overhead rate variance for the month is closest to:

Multiple Choice

$228 F

$246 U

$246 F

$228 U

Answer 1

Answer:- Variable overhead rate variance = (Standard rate –Actual rate)*Actual working hours

                                        =($5.30 per hour - $5.6 per hour)*820 hours

                                        =$246 Unfavourable

Where:-

Actual rate= Actual variable overhead cost/ Actual direct labor-hours

=$4592/820 hours =$5.6 per hour