Freytag Corporation's variable overhead is applied on the basis of direct labor-hours. The company has established the following variable overhead standards for product N06C: Standard direct labor-hours 5.5hours per unit of N06CStandard variable overhead rate$4.10per hour?The following data pertain to the most recent month's operations during which 1,600 units of product N06C were made: Actual direct labor-hours worked 8,700Actual variable overhead incurred$36,540?Required: a. What was the variable overhead rate variance for the month?b. What was the variable overhead efficiency variance for the month?
What will be an ideal response?
a.
Variable overhead rate variance = (AH × AR) ? (AH × SR)
= $36,540 ? (8,700 hours × $4.10 per hour)
= $36,540 ? ($35,670)
= $870 U
b.
Variable overhead efficiency variance = (AH ? SH*) × SR
= (8,700 hours ? 8,800 hours*) × $4.10 per hour
= (?100 hours) × $4.10 per hour
= $410 F
*SH = Standard hours per unit × Actual output
= 5.5 hours per unit × 1,600 units = 8,800 hours
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