Austin Brands Company uses standard costs for its manufacturing division

Question

Standards specify 0.1 direct labor hours per unit of product. At the beginning of the year, the static budget for variable overhead costs included the following data:

Production volume 6,300 units
Budgeted variable overhead costs $15,000
Budgeted direct labor hours 630 hours

At the end of the year, actual data were as follows:

Production volume 4,200 units
Actual variable overhead costs $15,000
Actual direct labor hours 480 hours

What is the variable overhead cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
A) $15,000 U
B) $15,000 F
C) $3,571 U
D) $4,687 F

Answer 1

C .C) Variable overhead cost variance = (Actual cost - Standard cost) x Actual quantity
Standard cost per direct labor hour = Budgeted variable overhead costs / Budgeted direct labor hours = $15,000 / 630 direct labor hours = $23.81 per direct labor hour

Actual cost per direct labor hour = Actual variable overhead costs / Actual direct labor hours = $15,000 / 480 direct labor hours = $31.25 per direct labor hour

Variable overhead cost variance = ($31.25 - $23.81 ) x 480 units = $3,571 Unfavorable