Warp Manufacturing Corporation uses a standard cost system for the production of its ski lift chairs. Warp uses machine-hours as an overhead base. The variable manufacturing overhead standards for each chair are 1.2 machine-hours at a standard cost of $18 per hour. During the month of September, Warp incurred 34,000 machine-hours in the production of 32,000 ski lift chairs. The total variable manufacturing overhead cost was $649,400. What is Warp's variable overhead rate variance for September?

A) $37,400 Unfavorable
B) $41,800 Favorable
C) $79,200 Favorable
D) $84,040 Favorable

Question

Kabir Gandhiwadi · Accepted Answer

Final Answer : A, Explanation :  The variable overhead rate variance is calculated as the difference between the actual cost per hour and the standard cost per hour, multiplied by the actual hours worked. The standard cost for the variable manufacturing overhead is $18 per hour. The actual cost per hour can be calculated as the total variable manufacturing overhead cost divided by the actual machine-hours, which is $649,400 / 34,000 = $19.1 per hour. The rate variance is then ($19.1 - $18) * 34,000 = $1.1 * 34,000 = $37,400 Unfavorable, because the actual cost per hour is higher than the standard cost per hour.

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