Nitrol Corporation manufactures brass vases using a standard cost system with standard machine-hours as the activity base for overhead.The following information relates to vase production at Nitrol for last year: The standard machine-hours per vase is 1.25.Last year Nitrol produced 84,000 vases. What was Nitrol's variable overhead rate variance for last year?
A)$1,000 Favorable
B)$1,060 Unfavorable
C)$2,060 Unfavorable
D)$9,500 Unfavorable

Question

Nitrol Corporation manufactures brass vases using a standard cost system with standard machine-hours as the activity base for overhead.The following information relates to vase production at Nitrol for last year:  The standard machine-hours per vase is 1.25.Last year Nitrol produced 84,000 vases. What was Nitrol's variable overhead rate variance for last year?
A)$1,000 Favorable 
B)$1,060 Unfavorable 
C)$2,060 Unfavorable 
D)$9,500 Unfavorable

Quizplus · Accepted Answer

SR = $50,000 ÷ 100,000 hours = $0.50 per hour
AH × AR = $53,560
Variable overhead rate variance = (AH × AR)- (AH × SR)
= ($53,560)- (103,000 hours × $0.50 per hour)
= $53,560 - $51,500
= $2,060 U

Nitrol Corporation Manufactures Brass Vases Using a Standard Cost System