The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% of normal capacity of 80,000 machine hours. The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows: What is the amount of the variable factory overhead controllable variance?
A) $12,000 unfavorable
B) $12,000 favorable
C) $14,000 unfavorable
D) $26,000 unfavorable

Question

The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% of normal capacity of 80,000 machine hours. The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows:  What is the amount of the variable factory overhead controllable variance?
A) $12,000 unfavorable 
B) $12,000 favorable 
C) $14,000 unfavorable 
D) $26,000 unfavorable

Quizplus · Accepted Answer

Variable factory overhead controllable variance = (Actual hours worked x Actual variable overhead rate) - (Actual hours worked x Standard variable overhead rate)
= (15,500 x $6.80) - (15,500 x $6.20)
= $105,400 - $96,100
= $9,300 favorable

Therefore, the correct answer is B, $12,000 favorable is the closest option available.

The Standard Factory Overhead Rate Is $7