Asked by Jamesetta Quiteh on Jul 24, 2024
Verified
Miguez Corporation makes a product with the following standard costs: The company budgeted for production of 3,300 units in September, but actual production was 3,200 units. The company used 6,140 liters of direct material and 1,750 direct labor-hours to produce this output. The company purchased 6,500 liters of the direct material at $7.90 per liter. The actual direct labor rate was $31.10 per hour and the actual variable overhead rate was $2.60 per hour.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 September is:
A) $128 Favorable
B) $175 Unfavorable
C) $175 Favorable
D) $128 Unfavorable
Variable Overhead Rate Variance
Variable overhead rate variance is the difference between the actual variable overhead costs incurred and the expected (standard) costs, influenced by fluctuations in production activity levels.
- Assess variable overhead by calculating efficiency and rate variances to scrutinize overhead expense management.
Verified Answer
RJ
Ryan James BayerJul 30, 2024
Final Answer :
C
Explanation :
To calculate the variable overhead rate variance, we need to compare the actual variable overhead rate per hour to the standard variable overhead rate per hour, and then multiply the difference by the actual number of hours worked.
Standard variable overhead rate per hour = $1.80 (given)
Actual variable overhead rate per hour = $2.60 (given)
Actual hours worked = 1,750
Variable overhead rate variance = (Actual variable overhead rate per hour - Standard variable overhead rate per hour) x Actual hours worked
= ($2.60 - $1.80) x 1,750
= $875 Favorable
Therefore, the variable overhead rate variance for September is $875 Favorable, which means that the actual variable overhead rate per hour was higher than the standard variable overhead rate per hour, but the company used fewer direct labor-hours than expected, resulting in a favorable variance. Option C is the correct answer.
Standard variable overhead rate per hour = $1.80 (given)
Actual variable overhead rate per hour = $2.60 (given)
Actual hours worked = 1,750
Variable overhead rate variance = (Actual variable overhead rate per hour - Standard variable overhead rate per hour) x Actual hours worked
= ($2.60 - $1.80) x 1,750
= $875 Favorable
Therefore, the variable overhead rate variance for September is $875 Favorable, which means that the actual variable overhead rate per hour was higher than the standard variable overhead rate per hour, but the company used fewer direct labor-hours than expected, resulting in a favorable variance. Option C is the correct answer.
Learning Objectives
- Assess variable overhead by calculating efficiency and rate variances to scrutinize overhead expense management.
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