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 $ 24,100 9,400 15.100 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

Standard Overhead
Standard Time	Standard Rate	Standard Cost per unit
0.6	$                       0.80	$                             0
Standard Overhead Cost for 24,100 Units
Standard Time	Standard Rate	Standard Cost per unit
14460	$                       0.80	$                   11,568
Hrs (24,100 X 0.6)	Per Hours
ACTUAL OVERHEAD EXPENSES FOR 24,100 UNITS
Actual Time	Actual Rate	Actual Cost
15100	$                       0.62	$                     9,400
Hrs	Per Hours
Variable OVH Rate variance =		V-OVH std. Cost	-	V-OVH Actual Cost
Variable OVH Rate variance =		$                   11,568	-	$                  9,400
Variable OVH Rate variance =		$                     2,168	Favorable
Variable OVH Spending variance =		Act. Hrs Worked	X   (	Act Ovh. Rate	-	Std. Overhead rate	)
Variable OVH Spending variance =		15,100	X   (	$                     0.62	-	$                              0.80	)
Variable OVH Spending variance =		15,100	X	$                     0.18
Variable OVH Spending variance =		$               2,680.00	Favorable
Variable OVH Efficiency variance =		Std. Oveh Rate	X   (	Actual Hrs	-	Standard Hours	)
Variable OVH Efficiency variance =		$                       0.80	X   (	15100	-	14460	)
Variable OVH Efficiency variance =		$                       0.80	X	640
Variable OVH Efficiency variance =		$                   512.00	Unfavorable