A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours.
| Standard hours per unit of output | 3.60 | DLHs | |
| Standard variable overhead rate | $ | 10.95 | per DLH |
The following data pertain to operations for the last month:
| Actual direct labor-hours | 8,900 | DLHs | |
| Actual total variable manufacturing overhead cost | $ | 95,820 | |
| Actual output | 2,300 | units | |
What is the variable overhead rate variance for the month?
Multiple Choice
Explanation
AH × AR = $95,820
Variable overhead rate variance = (AH × AR) − (AH × SR)
= ($95,820) − (8,900 hours × $10.95 per hour)
= $95,820 − $97,455
= $1,635 F
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