Standard Corporation has developed standard manufacturing overhead costs based on a capacity of 180,000 direct labor-hours (DLHs) as follows: Standard overhead costs per unit:
Variable portion: 2 DLHs × $3 per DLH = $6
Fixed portion: 2 DLHs × $5 per DLH = $10
The following data pertain to operations in April:
The variable overhead rate variance for April was:
A) $15,000 Unfavorable
B) $23,000 Unfavorable
C) $38,000 Favorable
D) $38,000 Unfavorable

Question

Standard Corporation has developed standard manufacturing overhead costs based on a capacity of 180,000 direct labor-hours (DLHs) as follows: Standard overhead costs per unit:
Variable portion: 2 DLHs × $3 per DLH = $6
Fixed portion: 2 DLHs × $5 per DLH = $10
The following data pertain to operations in April:
 The variable overhead rate variance for April was:
A) $15,000 Unfavorable 
B) $23,000 Unfavorable 
C) $38,000 Favorable 
D) $38,000 Unfavorable

Quizplus · Accepted Answer

AH × AR = $518,000
Variable overhead rate variance = (AH × AR) − (AH × SR)
= ($518,000) − (165,000 hours × $3.00 per hour)
= $518,000 − $495,000
= $23,000 U

Standard Corporation Has Developed Standard Manufacturing Overhead Costs Based on a Capacity