The following data for November have been provided by Mazzio Corporation, a producer of precision drills for oil exploration: Budgeted production 4,000drillsStandard machine-hours per drill 8.4machine-hoursStandard indirect labor$9.40per machine-hourStandard power$2.90per machine-hour Actual production 4,300drillsActual machine-hours 36,530machine-hoursActual indirect labor$362,756 Actual power$97,693 Required:Compute the variable overhead rate variances for indirect labor and for power for November. Indicate whether each of the variances is favorable (F) or unfavorable (U). Show your work.
What will be an ideal response?
Indirect labor:
Variable overhead rate variance = (AH × AR) ? (AH × SR).
= $362,756 ? (36,530 hours × $9.40 per hour).
= $362,756 ? $343,382.
= $19,374 U.
Power:
Variable overhead rate variance = (AH × AR) ? (AH × SR).
= $97,693 ? (36,530 hours × $2.90 per hour).
= $97,693 ? $105,937.
= $8,244 F.
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