The Upton Company uses a standard costing system in which variable overhead is assigned to production on the basis of standard direct labor-hours. Data for the month of February include the following:
Variable overhead cost incurred: $48,700
Total variable overhead variance: $300 F
Standard hours allowed for actual production: 7,000
Actual direct labor-hours worked: 6,840
-The standard variable overhead rate per direct labor-hour is:
A) $6.91
B) $6.95
C) $7.00
D) $7.12

Question

The Upton Company uses a standard costing system in which variable overhead is assigned to production on the basis of standard direct labor-hours. Data for the month of February include the following:
  Variable overhead cost incurred: $48,700
  Total variable overhead variance: $300 F
  Standard hours allowed for actual production: 7,000
  Actual direct labor-hours worked: 6,840
-The standard variable overhead rate per direct labor-hour is:
A) $6.91
B) $6.95
C) $7.00
D) $7.12

Quizplus · Accepted Answer

The total variable overhead variance is $300 favorable, meaning the actual variable overhead cost was $300 less than the standard cost. The standard cost for 7,000 hours is $48,700 + $300 = $49,000. Therefore, the standard variable overhead rate per direct labor-hour is $49,000 / 7,000 hours = $7.00.

The Upton Company Uses a Standard Costing System in Which