Asked by Kevin Huynh on Apr 26, 2024
Verified
Highfill Corporation's variable overhead is applied on the basis of direct labor-hours. The standard cost card for product D80D specifies 8.4 direct labor-hours per unit of D80D. The standard variable overhead rate is $5.60 per direct labor-hour. During the most recent month, 800 units of product D80D were made and 6,800 direct labor-hours were worked.The actual variable overhead incurred was $41,140.Required:a. What was the variable overhead rate variance for the month?b. What was the variable overhead efficiency variance for the month?
Variable Overhead Rate
The rate at which variable overhead costs are allocated to each unit of production, based on a certain activity level.
Direct Labor-Hours
Comprehensive work time recorded by employees who are directly engaged in producing goods.
- Derive the variable overhead rate and evaluate efficiency variances.
- Understand the effects of positive and negative variances through thorough examination.
Verified Answer
JC
Jonathan CohenApr 28, 2024
Final Answer :
a.Variable overhead rate variance = (Actual hours × Actual rate) − (Actual hours × Standard rate)= $41,140 − (6,800 hours × $5.60 per hour)= $41,140 − ($38,080)= $3,060 Unfavorableb.Variable overhead efficiency variance = (Actual hours − Standard hours*) × Standard rate= (6,800 hours − 6,720 hours*) × $5.60 per hour= (80 hours) × $5.60 per hour= $448 Unfavorable*Standard hours = Standard hours per unit × Actual output= 8.4 hours per unit × 800 units = 6,720 hours
Learning Objectives
- Derive the variable overhead rate and evaluate efficiency variances.
- Understand the effects of positive and negative variances through thorough examination.
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