Derf Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000. The variable overhead rate variance for the period was:
A)$5,300 Unfavorable
B)$1,200 Unfavorable
C)$6,300 Unfavorable
D)$6,500 Unfavorable

Question

Quizplus · Accepted Answer

Variable overhead rate variance = (Actual variable overhead rate - Standard variable overhead rate) * Actual direct labor-hours= (($108,500 / 17,200) - ($135,000 * 0.8 / 9,000 * 2)) * 17,200= ($6.31 - $6.00) * 17,200= $5,300 Unfavorable

Derf Corporation Uses a Standard Cost System in Which It