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 variable overhead rate variance is:
A)$4,275 favorable
B)$4,275 unfavorable
C)$1,050 unfavorable
D)$1,050 favorable

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 variable overhead rate variance is:
A)$4,275 favorable
B)$4,275 unfavorable
C)$1,050 unfavorable
D)$1,050 favorable

Quizplus · Accepted Answer

Variable overhead rate variance = (AH F1F1F1S1F1F1F10 AR)- (AH F1F1F1S1F1F1F10 SR)
$42,750 - (2,850 setups F1F1F1S1F1F1F10 $16.50 per setup)
= $42,750 - $47,025 = $4,275 F

The Richie Company Uses a Standard Costing System in Which