The Dillon Corporation makes and sells a single product. Overhead costs are applied on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit. The Dillon Corporation had the following budgeted and actual data for March: The variable overhead rate variance for March is:
A)$4,900 U
B)$11,060 U
C)$14,700 U
D)$17,300 U

Question

The Dillon Corporation makes and sells a single product. Overhead costs are applied on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit. The Dillon Corporation had the following budgeted and actual data for March:  The variable overhead rate variance for March is:
A)$4,900 U 
B)$11,060 U 
C)$14,700 U 
D)$17,300 U

Quizplus · Accepted Answer

The variable overhead rate variance can be calculated as:

Actual variable overhead - (Standard variable overhead rate × Actual direct labor hours)

Using the data from the table provided:

Actual variable overhead = $184,800
Standard variable overhead rate = $6.20 per direct labor-hour
Actual direct labor hours = 30,000 ÷ 5 = 6,000 direct labor-hours

Plugging these numbers into the formula:

$184,800 - ($6.20 × 6,000) = $11,060 U

Therefore, the answer is B.

The Dillon Corporation Makes and Sells a Single Product