Irving Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct labor 0.20 hours $ 29.00 per hour $ 5.80 Variable overhead 0.20 hours $ 6.50 per hour $ 1.30 In November the company's budgeted production was 6,800 units, but the actual production was 6,600 units. The company used 1,510 direct labor-hours to produce this output. The actual variable overhead cost was $9,211. The company applies variable overhead on the basis of direct labor-hours. The variable overhead rate variance for November is:

Question

Jessie Chang

Business

11 December, 05:12

Irving Corporation makes a product with the following standards for direct labor and variable overhead: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct labor 0.20 hours $ 29.00 per hour $ 5.80 Variable overhead 0.20 hours $ 6.50 per hour $ 1.30 In November the company's budgeted production was 6,800 units, but the actual production was 6,600 units. The company used 1,510 direct labor-hours to produce this output. The actual variable overhead cost was $9,211. The company applies variable overhead on the basis of direct labor-hours. The variable overhead rate variance for November is:

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Allen Briggs · Answer 1

Manufacturing overhead rate variance = $604 favorable

Explanation:

Giving the following information:

Variable overhead 0.20 hours $ 6.50 per hour

The company used 1,510 direct labor-hours to produce this output. The actual variable overhead cost was $9,211.

To calculate the variable overhead rate variance, we need to use the following formula:

Manufacturing overhead rate variance = (standard rate - actual rate) * actual quantity

Actual rate = 9,211/1,510 = $6.1

Manufacturing overhead rate variance = (6.5 - 6.1) * 1,510

Manufacturing overhead rate variance = $604 favorable