The following data have been provided by Lopus Corporation: Budgeted production 2,700 units Standard machine-hours per unit 2.8 machine-hours Standard lubricants $ 4.30 per machine-hour Standard supplies $ 3.00 per machine-hour Actual production 3,000 units Actual machine-hours 8,180 machine-hours Actual lubricants (total) $ 36,722 Actual supplies (total) $ 24,112 Required: Compute the variable overhead rate variances for lubricants and for supplies.

Answer and Explanation:

The computation of the variable overhead rate variances is shown below:

As we know that

Variable overhead rate variance = (standard rate - actual rate) * actual hour

For Lubricants

Actual rate = $36,722 : 8,180 machine hours = 4.48924

Now the variable overhead rate variance is

= ($4.30 - $4.48924) * 8,180 machine hours

= $1,548 Unfavorable

For Supplies

Actual rate = 24,112 : 8,180 machine hours = $2.9476

Now the variable overhead rate variance is

= ($3 - $2.9476) * 8,180 machine hours

= $429 favorable

We simply applied the above formula