Asked by Jared Jacobson on May 01, 2024
Verified
Majer Corporation makes a product with the following standard costs: The company reported the following results concerning this product in February.
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.The variable overhead rate variance for February is:
A) $191 Unfavorable
B) $191 Favorable
C) $196 Unfavorable
D) $196 Favorable
Variable Overhead Rate Variance
The difference between the actual variable overhead incurred and the standard variable overhead allocated to produced goods, based on the standard variable overhead rate.
Direct Materials Purchases Variance
The difference between the actual cost of direct material purchases and the expected (or standard) cost, adjusted for volume purchased.
Standard Costs
Predetermined costs for materials, labor, and overhead used in budgeting and assessing performance.
- Determine and compute variations in variable manufacturing overhead, focusing on both rate and efficiency discrepancies.
Verified Answer
Actual variable overhead rate = $3,940 ÷ 980 = $4.00 per hour
Standard variable overhead rate = $3.80 per hour
Actual hours worked = 960
Variable overhead rate variance = (Actual hours worked x (Actual rate - Standard rate))
= (960 x ($4.00 - $3.80))
= $192
Since the actual variable overhead rate was $0.01 lower than the standard rate, the variance is favorable. Therefore, the correct answer is B) $191 Favorable.
Learning Objectives
- Determine and compute variations in variable manufacturing overhead, focusing on both rate and efficiency discrepancies.
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