Harry Company's standard variable overhead rate is $6 per direct labour hour,and each unit requires 2 standard direct labour hours.During March,Harry recorded 6,000 actual direct labour hours,$37,000 actual variable overhead costs,and 2,900 units of product manufactured.
What is the total variable overhead variance for March for Harry?
A)$600 (U)
B)$1,000 (U)
C)$1,200 (U)
D)$2,200 (U)

Question

Harry Company's standard variable overhead rate is $6 per direct labour hour,and each unit requires 2 standard direct labour hours.During March,Harry recorded 6,000 actual direct labour hours,$37,000 actual variable overhead costs,and 2,900 units of product manufactured. 
What is the total variable overhead variance for March for Harry?
A)$600 (U)
B)$1,000 (U)
C)$1,200 (U)
D)$2,200 (U)

Quizplus · Accepted Answer

The total variable overhead variance is calculated by comparing the actual variable overhead costs to the standard variable overhead costs for the actual production. The standard variable overhead cost is $6 per direct labor hour, and each unit requires 2 hours, so the standard cost per unit is $12. For 2,900 units, the standard variable overhead cost is 2,900 units * $12/unit = $34,800. The actual variable overhead cost is $37,000. The variance is $37,000 (actual) - $34,800 (standard) = $2,200 unfavorable (U), because the actual costs were higher than the standard costs.

Harry Company's Standard Variable Overhead Rate Is $6 Per Direct