Question

# Dirickson Inc. has provided the following data concerning one of the products in its standard cost...

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:- 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

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