A manufacturing company uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period:
-What was the variable overhead rate variance for the period to the nearest dollar?
A) $1,875 U
B) $900 F
C) $900 U
D) $1,875 F

Question

A manufacturing company uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:  The following data pertain to operations for the most recent period: 
-What was the variable overhead rate variance for the period to the nearest dollar?
A) $1,875 U 
B) $900 F 
C) $900 U 
D) $1,875 F

Quizplus · Accepted Answer

Variable overhead rate variance = (Actual variable overhead rate - Standard variable overhead rate) x Actual machine-hours 
Actual variable overhead rate = Actual variable overhead cost / Actual machine-hours 
= $82,500 / 50,000 MHs = $1.65 per MH 
Standard variable overhead rate = Budgeted variable overhead cost / Budgeted machine-hours 
= $75,000 / 45,000 MHs = $1.67 per MH 
Variable overhead rate variance = ($1.65 - $1.67) x 50,000 MHs = $900 U. 
Therefore, choice C is the correct answer.

A Manufacturing Company Uses a Standard Costing System in Which