The following standards for variable overhead have been established for a company that makes only one product: Standard hours per unit of output 3.6hoursStandard variable overhead rate$16.05per hourThe following data pertain to operations for the last month: Actual hours 5,000hoursActual total variable overhead cost$80,000 Actual output 1,300unitsRequired:a. What is the variable overhead rate variance for the month?b. What is the variable overhead efficiency variance for the month?
What will be an ideal response?
a.
Variable overhead rate variance = (AH × AR) ? (AH × SR)
= $80,000 - (5,000 hours × $16.05 per hour)
= $80,000 - ($80,250)
= $250 F
b.
SH = Standard hours per unit × Actual output
= 3.6 hours per unit × 1,300 units
= 4,680 hours
Variable overhead efficiency variance = (AH ? SH) × SR
= (5,000 hours - 4,680 hours) × $16.05 per hour
= (320 hours) × $16.05 per hour
= $5,136 U
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