Asked by Lauren Byrd-Moreno on Jun 12, 2024
Verified
If variable manufacturing overhead is applied based on direct labor-hours, it is impossible to have a favorable labor rate variance and unfavorable variable overhead rate variance for the same period.
Variable Manufacturing Overhead
The portion of manufacturing overhead costs that varies with the level of production output, such as utility costs or indirect materials.
Labor Rate Variance
The difference between the actual hourly labor rate and the standard rate, multiplied by the number of hours worked during the period.
Variable Overhead Rate Variance
The difference between the actual variable overhead cost incurred during a period and the standard cost that should have been incurred based on the actual activity of the period.
- Evaluate when and why variances can be favorable or unfavorable in manufacturing overhead.
- Analyze the effect of labor rates on cost variances and operational efficiency.
Verified Answer
Learning Objectives
- Evaluate when and why variances can be favorable or unfavorable in manufacturing overhead.
- Analyze the effect of labor rates on cost variances and operational efficiency.
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