The Albright Company uses standard costing and has established the following standards $f$ its single product:
$\begin{array}{|l|r|}
\hline \text { Direct Materials } & 2 \text { litres at \$3 per litre } \
\hline \text { Direct Labour } & 0.5 \text { hours at \$8 per hour } \
\hline \text { Variable Manufacturing Overhead } & 0.5 \text { hours at \$2 per hour } \
\hline
\end{array}$
During November, the company made 4,000 units and incurred the following costs:
$\begin{array}{|l|r|}
\hline \text { Direct Materials Purchased } & 8,100 \text { litres at } \$ 3.10 \text { per litre } \
\hline \text { Direct Materials Used } & 7,600 \text { litres } \
\hline \text { Direct Labour Used } & 2,200 \text { hours at } \$ 8.25 \text { per hour } \
\hline \text { Actual Variable Manufacturing Overhead } & \$ 4,175 \
\hline
\end{array}$
The company applies variable manufacturing overhead to products on the basis of direct labour hours.
-What was the total variable overhead variance for November?
A) $175 unfavourable.
B) $225 favourable.
C) $225 unfavourable.
D) $400 unfavourable.

Question

Quizplus · Accepted Answer

The total variable overhead variance is the difference between the actual variable overhead and the standard variable overhead. The standard variable overhead is calculated as follows:Standard variable overhead = Standard variable overhead rate x Actual direct labour hours= $2 per hour x 2,200 hours= $4,400The actual variable overhead is given as $4,175. Therefore, the total variable overhead variance is:Total variable overhead variance = Actual variable overhead - Standard variable overhead= $4,175 - $4,400= $225 unfavourable

The Albright Company Uses Standard Costing and Has Established the Following