The Maxwell Corporation has a standard costing system in which variable manufacturing overhead is assigned to production on the basis of standard machine-hours. The following data are available for July: • Actual variable manufacturing overhead cost incurred: $22,620
• Actual machine-hours worked: 1,600 hours
• Variable overhead rate variance: $3,420 Unfavorable
• Total variable overhead spending variance: $4,620 Unfavorable
The standard number of machine-hours allowed for July production is:
A)1,500 hours
B)1,600 hours
C)1,700 hours
D)2,270 hours

Question

Quizplus · Accepted Answer

The variable overhead rate variance is calculated as (Actual hours x Actual rate) - (Actual hours x Standard rate). Given the unfavorable variance of $3,420, we can find the standard rate. The total spending variance is the sum of the rate and efficiency variances, which is $4,620 unfavorable. Solving these equations shows that the standard hours allowed is 1,500 hours.

The Maxwell Corporation Has a Standard Costing System in Which