Leshem Incorporated makes a single product-an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below: The variable overhead rate variance is:
A) $9,184 U
B) $8,528 F
C) $9,184 F
D) $8,528 U

Question

Leshem Incorporated makes a single product-an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below:  The variable overhead rate variance is:
A) $9,184 U 
B) $8,528 F 
C) $9,184 F 
D) $8,528 U

Quizplus · Accepted Answer

Variable component of the predetermined overhead rate (SR) = $52,920/14,000 machine-hours
= $3.78 per machine-hour
Variable overhead rate variance = (AH × AR) − (AH × SR)
= ($30,784) − (10,400 machine-hours × $3.78 per machine-hour)
= ($30,784) − ($39,312)
= $8,528 F

Leshem Incorporated Makes a Single Product-An Electrical Motor Used in Many