A manufacturing company has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period:
The variable overhead rate variance for the period was closest to:
A) $585 U
B) $585 F
C) $955 U
D) $955 F

Question

A manufacturing company has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:  The following data pertain to operations for the most recent period:
 The variable overhead rate variance for the period was closest to:
A) $585 U 
B) $585 F 
C) $955 U 
D) $955 F

Quizplus · Accepted Answer

SR = $28,490 ÷ 3,700 MHs = $7.70 per MH
AH × AR = $29,445
Labor rate variance = (AH × AR) − (AH × SR)
= $29,445 − (3,900 MHs × $7.70 per MH)
= $29,445 − $30,030
= $585 F

A Manufacturing Company Has a Standard Costing System Based on Standard