Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours. Each unit requires two standard hours of direct labor for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at $900,000 for the year, and the fixed manufacturing overhead rate was $1.50 per direct labor-hour. The actual data pertaining to the manufacturing overhead for the year are presented below:
-Franklin's variable overhead rate variance for the year is:
A)$20,000 unfavorable
B)$22,000 favorable
C)$22,000 unfavorable
D)$20,000 favorable

Question

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours. Each unit requires two standard hours of direct labor for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at $900,000 for the year, and the fixed manufacturing overhead rate was $1.50 per direct labor-hour. The actual data pertaining to the manufacturing overhead for the year are presented below: 
-Franklin's variable overhead rate variance for the year is:
A)$20,000 unfavorable 
B)$22,000 favorable 
C)$22,000 unfavorable 
D)$20,000 favorable

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead at capacity F1F1F1S1F1F1F10 Estimated total amount of the allocation base at capacity = $900,000 F1F1F1S1F1F1F10 (200,000 units F1F1F1S1F1F1F10 2 hours per unit)= $2.25 per hour
Predetermined overhead rate = Fixed component of predetermined overhead rate + Variable component of predetermined overhead rate
$2.25 per hour = $1.50 per hour + Variable component of predetermined overhead rate
Variable component of predetermined overhead rate = $0.75 per hour = SR
Variable overhead rate variance = (AH F1F1F1S1F1F1F10 AR)- (AH F1F1F1S1F1F1F10 SR)
= $352,000 - (440,000 hours F1F1F1S1F1F1F10 $0.75 per hour)
= $352,000 - $330,000 = $22,000 U

Franklin Glass Works Uses a Standard Cost System in Which