The Upton Company employs a standard costing system in which variable overhead is assigned to production on the basis of direct labour hours. Data for the month of February include the following:
$\begin{array} { | l | r | }
\hline \text { Variable manufacturing overhead cost incurred } & \$ 48,700 \
\hline \text { Total variable overhead variance } & \$ 300 \text { favourable } \
\hline \text { Standard hours allowed for actual production } & 7,000 \
\hline \text { Actual direct labour hours worked } & 6,840 \
\hline
\end{array}$

-What is the standard variable overhead rate per direct labour hour?
A) $6.91.
B) $6.95.
C) $7.00.
D) $7.12.

Question

The Upton Company employs a standard costing system in which variable overhead is assigned to production on the basis of direct labour hours. Data for the month of February include the following:
$\begin{array} { | l | r | } 
\hline \text { Variable manufacturing overhead cost incurred } & \$ 48,700 \
\hline \text { Total variable overhead variance } & \$ 300 \text { favourable } \
\hline \text { Standard hours allowed for actual production } & 7,000 \
\hline \text { Actual direct labour hours worked } & 6,840 \
\hline
\end{array}$

-What is the standard variable overhead rate per direct labour hour?
A) $6.91.
B) $6.95.
C) $7.00.
D) $7.12.

Quizplus · Accepted Answer

The standard variable overhead rate per direct labour hour is calculated by adding the total variable overhead variance to the variable manufacturing overhead cost incurred and then dividing by the standard hours allowed for actual production. The calculation is $(\$48,700 + \$300) / 7,000 = \$49,000 / 7,000 = \$7.00$.

The Upton Company Employs a Standard Costing System in Which