Wineman 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) $31,901 U
B) $31,244 F
C) $31,901 F
D) $31,244 U

Question

Wineman 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) $31,901 U 
B) $31,244 F 
C) $31,901 F 
D) $31,244 U

Quizplus · Accepted Answer

Variable component of the predetermined overhead rate (SR) = $153,425/47,500 machine-hours
= $3.23 per machine-hour
Variable overhead rate variance = (AH × AR) − (AH × SR)
= ($107,000) − (42,800 machine-hours × $3.23 per machine-hour)
= ($107,000) − ($138,244)
= $31,244 F

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