The Richie Company uses a standard costing system in which variable manufacturing overhead is assigned to production on the basis of the number of machine setups. Data for the month of October include the following:

• Variable manufacturing overhead cost incurred: $42,750
• Total variable manufacturing overhead variance: $5,430 favorable
• Standard machine setups allowed for actual production: 2,920 setups
• Actual machine setups incurred: 2,850 setups
-The standard variable overhead rate per machine setup is:
A)$16.91
B)$12.78
C)$15.00
D)$16.50

Question

The Richie Company uses a standard costing system in which variable manufacturing overhead is assigned to production on the basis of the number of machine setups. Data for the month of October include the following:

• Variable manufacturing overhead cost incurred: $42,750
• Total variable manufacturing overhead variance: $5,430 favorable
• Standard machine setups allowed for actual production: 2,920 setups
• Actual machine setups incurred: 2,850 setups 
-The standard variable overhead rate per machine setup is:
A)$16.91
B)$12.78
C)$15.00
D)$16.50

Quizplus · Accepted Answer

Total variable manufacturing overhead variance = Actual manufacturing overhead cost incurred - Standard manufacturing overhead cost
$5,430 F = $42,750 - Standard manufacturing overhead cost
-$5,430 = $42,750 - Standard manufacturing overhead cost
Standard manufacturing overhead cost = $48,180
$48,180 F1F1F1S1F1F1F10 2,920 setups = $16.50 per setup

The Richie Company Uses a Standard Costing System in Which