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Majer Corporation makes a product with the following standard costs:

Standard Quantity
or Hours Standard Price or
Rate Standard Cost Per Unit
Direct materials 6.1 ounces $ 2.00 per ounce $ 12.20
Direct labor 0.7 hours $ 12.00 per hour $ 8.40
Variable overhead 0.7 hours $ 2.00 per hour $ 1.40
The company reported the following results concerning this product in February.

Originally budgeted output 5,400 units
Actual output 5,700 units
Raw materials used in production 33,100 ounces
Actual direct labor-hours 2,030 hours
Purchases of raw materials 28,300 ounces
Actual price of raw materials $ 17.10 per ounce
Actual direct labor rate $ 7.60 per hour
Actual variable overhead rate $ 1.10 per hour
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead rate variance for February is:

Multiple Choice

$1,827 F

$1,832 F

$1,827 U

$1,832 F

Respuesta :

Answer:

$1,827 F

Explanation:

Variable Overhead Rate Variance = (Standard Rate - Actual Rate) [tex]\times[/tex] Actual Hours

Here, as provided standard rate of overhead = $2.00 per hour.

Actual Rate = $1.10 per hour

Actual hours = 2,030 hours

Since it is provided that, the labor hours and variable overhead hours are equal that is 0.7 hours for each unit, actual hours for labor are provided, and thus, it is assumed actual variable overhead hours are also same.

Therefore, Variable Overhead Rate Variance shall be:

($2.00 - $1.10) [tex]\times[/tex] 2,030 = $1,827 Favorable

This variance is favorable because of the difference in between the standard and actual rate being positive.

Correct answer

$1,827 F

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