The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% of normal capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows: What is the amount of the variable factory overhead controllable variance?
A) $10,000 favorable
B) $2,500 unfavorable
C) $10,000 unfavorable
D) $2,500 favorable

Question

The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% of normal capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows:  What is the amount of the variable factory overhead controllable variance?
A) $10,000 favorable 
B) $2,500 unfavorable 
C) $10,000 unfavorable 
D) $2,500 favorable

Quizplus · Accepted Answer

Variable factory overhead controllable variance = Actual variable factory overhead - (Standard variable rate x Actual direct labor hours)

= ($47,000 - $40,000) - ($8 x 5,500)

= $7,000 - $44,000

= $37,000 unfavorable

Therefore, the answer is B, $2,500 unfavorable.

The Standard Factory Overhead Rate Is $10 Per Direct Labor