Kronstedt Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month:
What was the variable overhead rate variance for the month?
A) $710 unfavorable
B) $1,340 unfavorable
C) $630 favorable
D) $3,000 unfavorable

Question

Kronstedt Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: 
What was the variable overhead rate variance for the month?
A) $710 unfavorable 
B) $1,340 unfavorable 
C) $630 favorable 
D) $3,000 unfavorable

Quizplus · Accepted Answer

Variable overhead rate variance = (actual variable overhead rate - standard variable overhead rate) x actual hours worked

Actual variable overhead rate = $9,485 ÷ 2,500 = $3.79 per MH 
Standard variable overhead rate = $3.50 per MH

Variable overhead rate variance = ($3.79 - $3.50) x 2,150 MHs = $630 favorable

Kronstedt Corporation Has a Standard Cost System in Which It