The LAH company produces product BG,which includes variable overhead standard cost of 5 hours at £15 per hour,based on a budget production of 3,000 units.The actual results for the last period were as follows:
$$\begin{array} { l r }
\text { Production } & 3,100 \
\text { Hours incurred } & 16,000 \
\text { Variable overhead } & £ 235,00
\end{array}$$
Calculate the variable overhead cost variance.
A) £5,000 favorable
B) £5,000 adverse
C) £7,500 favorable
D) £7,500 adverse

Question

The LAH company produces product BG,which includes variable overhead standard cost of 5 hours at £15 per hour,based on a budget production of 3,000 units.The actual results for the last period were as follows:
$$\begin{array} { l r } 
\text { Production } & 3,100 \
\text { Hours incurred } & 16,000 \
\text { Variable overhead } & £ 235,00
\end{array}$$
Calculate the variable overhead cost variance.
A) £5,000 favorable
B) £5,000 adverse
C) £7,500 favorable
D) £7,500 adverse

Quizplus · Accepted Answer

The standard variable overhead cost is £45,000 (5 hours x £15 per hour x 3,000 units). The actual variable overhead cost is £235,000. The variable overhead cost variance is £5,000 favorable (actual cost - standard cost = £235,000 - £45,000 = £5,000).