Descamps Incorporated 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. The company has reported the following actual results for the product for July:
The variable overhead rate variance for the month is closest to:

A) $78 Favorable
B) $84 Favorable
C) $78 Unfavorable
D) $84 Unfavorable

First, calculate the actual variable overhead cost per hour:

Actual variable overhead cost = $18,540
Actual direct labor hours = 2,100
Actual variable overhead rate = Actual variable overhead cost / Actual direct labor hours
Actual variable overhead rate = $18,540 / 2,100 = $8.82 per direct labor hour

Next, calculate the expected variable overhead rate per direct labor hour:

Standard variable overhead rate per direct labor hour = $8.50 per direct labor hour

Finally, calculate the variable overhead rate variance:

Variable overhead rate variance = Actual variable overhead rate - Standard variable overhead rate
Variable overhead rate variance = $8.82 - $8.50 = $0.32 unfavorable per direct labor hour

To find the total variance, multiply the variable overhead rate variance by the actual direct labor hours:

Total variable overhead rate variance = Variable overhead rate variance x Actual direct labor hours
Total variable overhead rate variance = $0.32 x 2,100 = $672 unfavorable

Since the variance is unfavorable, the answer is either C or D. C is the best choice because it is the closest answer to $672.