Servantez Manufacturing Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company's cost formula for variable overhead is $9.50 per MH. During the month, the actual total variable overhead was $51,300 and the actual level of activity for the period was 5,700 MHs. What was the variable overhead rate variance for the month?
A) $2,850 favorable
B) $300 unfavorable
C) $2,850 unfavorable
D) $300 favorable

Question

Quizplus · Accepted Answer

The variable overhead rate variance is calculated as the difference between the actual variable overhead rate and the standard variable overhead rate, multiplied by the actual level of activity. In this case, the actual variable overhead rate is $51,300 / 5,700 MHs = $9.00 per MH, and the standard variable overhead rate is $9.50 per MH. Therefore, the variable overhead rate variance is ($9.00 - $9.50) * 5,700 MHs = $2,850 unfavorable.

Servantez Manufacturing Corporation Has a Standard Cost System in Which