Gremminger Incorporated makes a single product-a critical part used in commercial airline seats. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: The variable overhead rate variance is:
A) $19,404 F
B) $17,952 F
C) $19,404 U
D) $17,952 U

Question

Gremminger Incorporated makes a single product-a critical part used in commercial airline seats. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:  The variable overhead rate variance is:
A) $19,404 F 
B) $17,952 F 
C) $19,404 U 
D) $17,952 U

Quizplus · Accepted Answer

Variable component of the predetermined overhead rate (SR) = $70,350/35,000 labor-hours
= $2.01 per labor-hour
Variable overhead rate variance = (AH × AR) − (AH × SR)
= ($72,624) − (27,200 labor-hours × $2.01 per labor-hour)
= ($72,624) − ($54,672)
= $17,952 U

Gremminger Incorporated Makes a Single Product-A Critical Part Used in Commercial