Question

E9-11 Calculating Variable Manufacturing Overhead Variances [LO 9-5] Lamp Light Limited (LLL) manufactures lampshades. It applies variable overhead on the basis of direct labor hours. Information from LLL's standard cost card follows: Standard Quantity 0.6 Standard Rate $0.80 Standard Unit Cost $0.48 Variable manufacturing overhead During August, LLL had the following actual results: Units produced and sold Actual variable overhead Actual direct labor hours $ 26,000 9,560 16,700 Required: Compute LLL's variable overhead rate variance, variable overhead efficiency variance, and over- or underapplied variable overhead. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for Favorable/Overapplied and "U" for Unfavorable/Underapplied.) Variable Overhead Rate Variance Variable Overhead Efficiency Variance Variable Overhead Spending Variance

Answer 1

	Lamp Light Limited
Actual Direct labor hour	16700
Actual variable overhead	9560
Standard Hours=(Actual production*Standard Quantity)=(.60*26000)	15600
Variable overhead efficiency variance=SR*(AH-SH)
Variable overhead efficiency variance=.80*(16700-15600)	880	(U)
Variable overhead rate variance=AH*(AR-SR)
Variable overhead rate variance=$9560-16700*.80	-3800	(F)
Variable Overhead Spending Variance=AH*AR-SH*SR
Variable Overhead Spending Variance=$9560-15600*.80	-2920	(F)
Variable Overhead rate variance	3800	(F)
Variable overhead efficiency variance	880	(U)
Variable overhead spending variance	2920	(F)