The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activity level of 40,000 machine-hours: During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual overhead costs: The standard time allowed to complete one unit of product is 3.6 machine-hours.
-The variable overhead rate variance for maintenance cost for November was:
A)$7,420 unfavorable
B)$2,400 favorable
C)$9,820 unfavorable
D)$5,620 unfavorable

Question

The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activity level of 40,000 machine-hours: During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual overhead costs: The standard time allowed to complete one unit of product is 3.6 machine-hours.
-The variable overhead rate variance for maintenance cost for November was:
A)$7,420 unfavorable 
B)$2,400 favorable 
C)$9,820 unfavorable 
D)$5,620 unfavorable

Quizplus · Accepted Answer

Variable overhead rate variance = (AH F1F1F1S1F1F1F10 AR)- (AH F1F1F1S1F1F1F10 SR)
= $43,420 - (42,000 machine-hours F1F1F1S1F1F1F10 $0.90 per machine-hour)
= $43,420 - $37,800 = $5,620 U

The Chase Company Uses a Standard Cost System in Which