Stopyra Incorporated makes a single product-a cooling coil used in commercial refrigerators. 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) $6,052 U
B) $6,052 F
C) $6,528 F
D) $6,528 U

Question

Stopyra Incorporated makes a single product-a cooling coil used in commercial refrigerators. 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) $6,052 U 
B) $6,052 F 
C) $6,528 F 
D) $6,528 U

Quizplus · Accepted Answer

Variable component of the predetermined overhead rate (SR) = $28,200/12,000 labor-hours
= $2.35 per labor-hour
Variable overhead rate variance = (AH × AR) − (AH × SR)
= ($26,967) − (8,900 labor-hours × $2.35 per labor-hour)
= ($26,967) − ($20,915)
= $6,052 U

Stopyra Incorporated Makes a Single Product-A Cooling Coil Used in Commercial