Fluegge Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. The company has reported the following actual results for the product for December:
The variable overhead rate variance for the month is closest to:
A) $1,080 U
B) $1,080 F
C) $1,148 U
D) $1,148 F

Question

Fluegge Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.  The company has reported the following actual results for the product for December:
 The variable overhead rate variance for the month is closest to:
A) $1,080 U 
B) $1,080 F 
C) $1,148 U 
D) $1,148 F

Quizplus · Accepted Answer

Variable overhead rate variance = (AH × AR) − (AH × SR)
= AH × (AR - SR)
= 2,700 hours × ($5.90 per hour - $5.50 per hour)
= 2,700 hours × ($0.40 per hour)
= $1,080 U
or
Variable overhead rate variance = (AH × AR) − (AH × SR)
= $15,930 − (2,700 hours × $5.50 per hour)
= $15,930 − ($14,850)
= $1,080 U