Mzimba Sofa Company has developed the following manufacturing overhead standards for its sofa production. Manufacturing overhead at Mzimba is applied to production on the basis of standard machine-hours. The above standards were based on an expected annual volume of 20,000 sofas. The actual results last year were as follows:
-What was Mzimba's variable overhead rate variance?
A) $8,514 favorable
B) $8,766 unfavorable
C) $17,280 unfavorable
D) $54,846 unfavorable

Question

Mzimba Sofa Company has developed the following manufacturing overhead standards for its sofa production.  Manufacturing overhead at Mzimba is applied to production on the basis of standard machine-hours. The above standards were based on an expected annual volume of 20,000 sofas. The actual results last year were as follows: 
-What was Mzimba's variable overhead rate variance?
A) $8,514 favorable 
B) $8,766 unfavorable 
C) $17,280 unfavorable 
D) $54,846 unfavorable

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 production. In this case, the actual variable overhead rate is $1.70 per direct labor hour, the standard variable overhead rate is $1.60 per direct labor hour, and the actual level of production is 10,000 direct labor hours. Therefore, the variable overhead rate variance is ($1.70 - $1.60) x 10,000 = $8,514 favorable.

Mzimba Sofa Company Has Developed the Following Manufacturing Overhead Standards