Cuda Manufacturing Corporation uses a standard cost system with machine-hours (MHs) as the activity base for overhead. The following information relates to Cuda's operations last year: What was Cuda's variable overhead rate variance?
A)$6,000 Unfavorable
B)$15,000 Favorable
C)$20,000 Unfavorable
D)$21,000 Favorable

Question

Cuda Manufacturing Corporation uses a standard cost system with machine-hours (MHs) as the activity base for overhead. The following information relates to Cuda's operations last year:  What was Cuda's variable overhead rate variance?
A)$6,000 Unfavorable 
B)$15,000 Favorable 
C)$20,000 Unfavorable 
D)$21,000 Favorable

Quizplus · Accepted Answer

Variable overhead rate variance = actual variable overhead rate - standard variable overhead rate x actual machine hours.
Actual variable overhead rate = $392,000 / 98,000 = $4 per MH.
Standard variable overhead rate = $3.50 per MH.
Actual machine hours = 98,000 MH.
Variable overhead rate variance = ($4 - $3.50) x 98,000 MH = $49,000 Favorable.
Therefore, the answer is A, and none of the other answer choices are correct.

Cuda Manufacturing Corporation Uses a Standard Cost System with Machine-Hours