(Appendix 10A) Arca Incorporated makes a single product--a critical part used in commercial airline seats. 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) $18,955 F
B) $19,125 F
C) $19,125 U
D) $18,955 U

Question

(Appendix 10A) Arca Incorporated makes a single product--a critical part used in commercial airline seats. 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) $18,955 F 
B) $19,125 F 
C) $19,125 U 
D) $18,955 U

Quizplus · Accepted Answer

Variable component of the predetermined overhead rate (SR) = $38,700/30,000 machine-hours
= $1.29 per machine-hour
Variable overhead rate variance = (AH × AR) - (AH × SR)
= ($9,812) - (22,300 machine-hours × $1.29 per machine-hour)
= ($9,812) - ($28,767)
= $18,955 F

(Appendix 10A) Arca Incorporated Makes a Single Product--A Critical Part