Question

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 January is:A. 1,456 F
B. 1,461 F
C. 1,456 U
D. 1,461 U

Answer 1

Answer:

1,456 F

Explanation:

Overhead rate are of two types standard and actual. Standard is estimated and actual rate is calculated from actual data.

Standard Overhead rate = $4 per labor hour

Actual Overhead rate = $3.3 per labor hour

Overhead Rate variance = ( Actual Hours Worked x Actual overhead Rate per hour ) - ( Actual Hours Worked x Standard overhead Rate per hour)

Overhead Rate variance = ( 2080 x 3.3 ) - ( 2080 x 4)

Overhead Rate variance = 6,864 - 8320 = - $1,456

As there is a negative variance in a cost, so it is Favorable