Wisteria Co. produces snowboards and uses a standard cost system. Variable overhead is applied using direct labor hours. Standards allowed for each unit are 5.3 hours of labor at a standard variable overhead rate of $7.20. During December, Wisteria Co. produced 3,000 snowboards. Materials purchases totaled 21,500 pounds at a total cost of $224,780. Materials usage totaled 21,060 pounds. Payroll totaled $183,730 for 17,130 hours worked. Variable overhead incurred totaled $120,466. a. Calculate the variable overhead rate variance. (Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i. e., zero variance).)

Question

Adison Dalton

Business

17 June, 15:34

Wisteria Co. produces snowboards and uses a standard cost system. Variable overhead is applied using direct labor hours. Standards allowed for each unit are 5.3 hours of labor at a standard variable overhead rate of $7.20. During December, Wisteria Co. produced 3,000 snowboards. Materials purchases totaled 21,500 pounds at a total cost of $224,780. Materials usage totaled 21,060 pounds. Payroll totaled $183,730 for 17,130 hours worked. Variable overhead incurred totaled $120,466. a. Calculate the variable overhead rate variance. (Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i. e., zero variance).)

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Answers (1)

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Bria Waters · Answer 1

Variable overhead rate variance = $2,870 favorable

Explanation:

Variable overhead rate variance is the difference between the standard cost allowed for variable production overhead and the actual variable cost incurred.

This computed as follows:

$

17,130 hours should have cost (17,130 * 7.20) 123336

but did cost 120,466

Variable overhead rate variance 2870 Favorable

Variable overhead rate variance = $2,870