Cuda Manufacturing Corporation uses a standard cost system with machine-hours (MHs) as the activity base for overhead. The following information relates to Cuda's operations last year:

-What was Cuda's variable overhead rate variance?
A)$6,000 Unfavorable
B)$15,000 Favorable
C)$20,000 Unfavorable
D)$21,000 Favorable

Question

Cuda Manufacturing Corporation uses a standard cost system with machine-hours (MHs) as the activity base for overhead. The following information relates to Cuda's operations last year:

-What was Cuda's variable overhead rate variance?
A)$6,000 Unfavorable 
B)$15,000 Favorable 
C)$20,000 Unfavorable 
D)$21,000 Favorable

Quizplus · Accepted Answer

The variable overhead rate variance is calculated as follows:
Actual Variable Overhead - (Actual Hours Worked × Standard Variable Overhead Rate)
= $226,000 - (8,000 hours × $25 per hour)
= $26,000 unfavorable
Therefore, the answer is A) $6,000 unfavorable, as it is the only option that represents an unfavorable variance.

Cuda Manufacturing Corporation Uses a Standard Cost System with Machine-Hours