Question

Kartman Corporation makes a product with the following standard costs:

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost Per Unit
Direct materials	6.8 pounds	$ 7.30 per pound	$ 49.64
Direct labor	0.5 hours	$27.00 per hour	$ 13.50
Variable overhead	0.5 hours	$4.30 per hour	$ 2.15

In June the company's budgeted production was 3,700 units but the actual production was 3,800 units. The company used 22,450 pounds of the direct material and 2,320 direct labor-hours to produce this output. During the month, the company purchased 25,700 pounds of the direct material at a cost of $173,180. The actual direct labor cost was $57,321 and the actual variable overhead cost was $9,631.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead rate variance for June is:

Multiple Choice

• $283 Unfavorable

• $283 Favorable

• $345 Favorable

• $345 Unfavorable

Answer 1

ANSWER. C. $345 FAVORABLE

VARIABLE OVERHEAD RATE VARIANCE = ACTUAL HOURS * ( ACTUAL RATE - STANDARD RATE)

= 2,320 HOURS * ( $9631 / 2320 HOURS - $4.30 PER HOUR)

= 2,320 HOURS * ($4.1512 PER HOUR - $4.30 PER HOUR)

= $345 (FAVORABLE)